Indian stocks dropped for the third day in a row Monday, after news broke that federal prosecutors are probing the nation’s largest drugmaker Ranbaxy Laboratories for allegedly misleading the U.S. government about the quality of its low-cost drugs when seeking approval for its products in the U.S. Selling in the Indian IT sector also pressured the Sensex lower after Morgan Stanley warned Far East investors that further failures of U.S.-based financial companies could hit the sector hard.

"Technically, one might see some stabilization for some time and maybe some range bound movement. Fundamentals and news are so bad that ultimately one is going to see a downside breadth, maybe immediately or after two weeks. I expect the Sensex to go down to 11,500 to 12,000 levels," said Vibhav Kapoor of IL&FS.

The Bombay Stock Exchange's Sensex Index fell 139.34 points, or 1%, to 13,330.51. Here's a look at how some India-based American depositary shares traded in the U.S. on Monday.

Morgan Stanley downgraded shares of Indian Information technology provider Infosys Technologies (INFY) from overweight to equal-weight and cut its price target by 16% over concerns that demand from U.S.-based clients could slow further. In a report to clients, Morgan analysts Vipin Khare and Gaurav Rateria said, "Any more events like further bank closures, mergers or seizures could further aggravate the situation for offshore outsourcing vendors." American depositary shares of Infosys, which trade on the Nasdaq, slipped lower by 2.6% to $37.15.

Morgan Stanley’s bearish comments on Infosys took down a number of Indian technology ADRs Monday. Shares of Wipro (WIT), slid 2.9% to $10.71; Patni Computer Systems (PTI), dropped 2.7% to $10.75; and Satyam Computer (SAY), lost 2.3% to $22.54.

ICICI Bank(IBN) chief executive officer and managing director KV Kamath told reporters that corporate investment in India remains robust, despite headwinds like the recent decision by The Reserve Bank of India (RBI) to raise the cash reserve ratio, rising input costs and surging crude oil prices. "Our challenges are rising inflation and soaring commodity prices. What is insulating us is the huge pipeline of investment in core sectors. Though 60% of the Indian economy is from the services sector, we are yet to see this sort of challenge from the manufacturing sector. The banking side is also facing challenges but is not impacting the overall growth rate," Kamath said. Shares of ICICI Bank move down 1.2% to $26.29.

Leading the gainers list among Indian ADRs Monday were Sterlite Industries India (SLT), which traded up 2.3% to $15.46; WNS Holdings (WNS), which added 1% to $16.66; and Dr. Reddy’s Laboratories (RDY), which rose 1% to $15.70.

Be sure to check out the Far East Portfolio at Stockpickr.com every night to find out which stocks in India and China are making big moves and announcing major news.

China Recap

Chinese stocks traded mixed on Monday with shares in mainland China rising and shares in Hong Kong trading lower, as Far East investors squared up positions and remained on the sidelines ahead of major economic data due out later this week. Traders said that the market will be focused on June inflation data that is set to be released on Thursday.

"Some of the investors are still pessimistic. They’ve lost confidence, and tried to take some profits," said Peter Lai, investment manager at DBS Vickers in Hong Kong.
The Shanghai Composite Index ended up 21.62 points, or 0.76%, to 2,878.26 and Hong Kong’s Hang Seng Index traded down 170.09 points, or 0.8%, to 22,014.46. Here's a look at how some China-based American depositary shares traded in the U.S. on Monday.

According to enet.com, China’s leading Internet search engine Baidu.com (BIDU) has officially launched its online translation service on July 10. The new service will offer Chinese-to-English and English-to-Chinese translation and support the translation of 1,000 Chinese characters. Executives from Baidu said they will look to improve the quality of the services after initial trail users said the online translation service is weaker than a similar product offered by U.S.-based Internet search engine Google (GOOG). American depository shares of Baidu, which trade on the Nasdaq, dropped 4.4% to $291.40.

Citigroup upgraded Chinese online game operator Shanda Interactive Entertainment (SNDA) from hold to buy and set a price target of $35 a share, citing valuation and the launch of blockbuster game Changchun Online. The firm said the stock is attractive on a risk-to-reward basis with potential upside from positive newsflow from this week’s ChinaJoy event and Changchun’s game metrics. Also, Citigroup noted the stock trades at 11 times 2008 and 2009 EPS. Shares of Shanda fell 17 cents to $22.56.

Shares of Canadian Solar (CSIQ) soared 18% Monday after the company raised its revenue forecast for the second-quarter above its previous guidance. The company, which is incorporated in Canada but does all it’s manufacturing in China, said second-quarter sales will come in between the range of $210 million to $214 million, vs. previous guidance of of $185 million to $190 million. Shares of Canadian Solar shot up $5.99 to $38.39 on above average volume.

Shares of Qiao Xing Universal Telephone (XING), a Chinese cell phone maker, surged higher by 29% after the company filed a delayed annual report for 2007. The company said sales jumped 20% to 3.87 billion or $531 million for 2007. Net income came in at 903.9 million yuan, or $123.9 million vs. a net loss of 19.8 million yuan for 2006. Shares of Qiao Xing added $1.17 to $5.12 on extremely heavy volume.

Chinese alternative energy company Solarfun Power (SOLF) announced it has entered into a sales contract to supply 47 megawatts of cells to Europe-based PV systems provider Schuco International KG. Under the terms of the deal, Solarfun will deliver the cells at an undisclosed price through October 2009 for major solar projects in southeast Europe and the Middle East. The company said the deal was its largest project contract to date. Shares of Solarfun rose 5% to $14.87.

Some big movers to the upside among Chinese ADRs and China-based stocks Monday were Corgi International (CRGI), which soared 31% to $0.79; China Architectural Engineering (CAEI), which ripped higher by 15% to $8.20; Ninetowns Internet Technology Group (NINE), which shot up 14% to $2.20; and Agria (GRO), which finished up 7% to $4.26.

Be sure to check out the Far East Portfolio at Stockpickr.com every night to find out which stocks in India and China are making big moves and announcing major news.