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Global markets: Mixed performance

Jan 11, 2003

US markets in the current week have been volatile to say the least. Despite volatility, the Dow gained by 2% while the NASDAQ gained over 4% for the week. The main highlight for the week was the economic revival package announced by the US president. The package is worth nearly US$ 600 bn spread over a period of 10 years. This package provides for reduction in income taxes as well as the abolition of dividend taxes all together. It also proposes to create nearly 2 m jobs in the next three years. One of the revival plan's objectives was to spur investments in the stock markets. The stimulus package however failed to enthuse the markets. The current week also saw quarterly results announcement in a key Dow stock, Alcoa. Alcoa, one of the largest aluminium producers, reported earnings far below consensus estimates. This was a sentiment dampener during the week. Another disappointment was poor employment numbers, indicating that unemployment had actually risen in the month of December. Unemployment numbers dampened investor sentiment at the end of the week. Geopolitical concerns mainly Iraq has also increased during the week with coalition forces building up in the Middle East. On the other hand North Korea is also making the US administration nervous. Under these circumstances US investor sentiment may be frayed in the coming weeks.

Indices 4-Jan-03 10-Jan-03 Change
FTSE 4,004 3,974 -0.7%
Nikkei 8,578 8,470 -1.3%
BSE 3,358 3,358 0.0%
Hang Seng 9,583 9,722 1.4%
NASDAQ 1,387 1,448 4.4%
Dow 8,601 8,785 2.1%
Dax 3,098 3,037 -2.0%

Other international markets were mixed. European markets fell for the week while Asian markets gained marginally. The BSE-Sensex closed unchanged for the week. This was mainly due to weakness observed on Friday due to heavy selling in software stocks. Attention of investors however shifted to old economy stocks and this limited the fall in the indices. European indices on the other hand are reeling under poor performance of their economies. Germany the largest economy in the European region is witnessing a slowdown and this has impacted investor sentiment.

(Price in US $) 4-Jan-03 10-Jan-03 Change
Satyam Infoway 3.9 4.1 5.1%
ICICI Bank 6.2 6.5 4.8%
Dr. Reddy's 19.3 20.8 7.8%
Wipro 33.9 32.9 -2.9%
VSNL 3.8 3.6 -5.3%
MTNL 3.8 3.7 -2.6%
Infosys 69.3 69 -0.4%
Rediff 2 2.3 15.0%
HDFC Bank 13.6 13.9 2.2%
Satyam 12.7 12.1 -4.7%
Silverline 0.9 0.7 -22.2%

Performance of India ADRs was mixed in the current week. The major gainers were Dr. Reddy's (8%), HDFC Bank (2%) and ICICI Bank (5%). Losers on the other hand were a Satyam, Wipro and Infosys. Infosys though only marginally despite announcing quarterly results that were below expectations. The Infosys ADR had already run up on the indices in anticipation of the quarterly results. As the interest on the software counters waned, it gained on the old economy stocks like banks and Pharma, especially Dr Reddy's.

Weakness is likely to be observed in software ADRs due to the Infosys' results, which seemed a bit off mark as compared to expectations. Old economy ADRs on the other hand may see some further recovery in anticipation of their results as well as change in focus in their favour.

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