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Global: Profit booking is the norm... - Views on News from Equitymaster
 
 
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  • Jan 15, 2005

    Global: Profit booking is the norm...

    The week gone by witnessed lackluster activity in the leading US markets, with the Nasdaq closing at previous week levels while the Dow Jones closed the trading week amidst marginal losses. Rising crude prices and apprehensions over US interest rates kept the investors away from the markets. Other leading global indices barring the BSE-Sensex met the same fate.

      07-Jan-05 14-Jan-05 change
    CAC 3,878 3,855 -0.6%
    DAX 4,316 4,232 -1.9%
    FTSE 100 4,854 4,821 -0.7%
    Nikkei 11,433 11,438 0.0%
    BSE-Sensex 6,420 6,174 -3.8%
    Hang Seng 13,575 13,495 -0.6%

    Why this caution:

    A week after the release of the minutes of the Fed meet, investors adopted a cautious approach anticipating a faster rise in interest rates on the back of rising inflationary pressure. Further, news of the trade gap widening to US$ 60.3 bn did not help matters. Further, mixed reactions were witnessed among the investors towards specific stocks such as GM, which witnessed a dip of nearly 6% in vehicles sales in December, while on the other hand, tech major, Apple indicated above expectations results. December job data also released encouraging news, whereby payrolls rose by 157,000.

    Attacks in the Middle East, specifically in Saudi Arabia, pushed crude oil prices higher, resulting in the prices touching a new six-week high of over US$ 48 per barrel. These attacks raised doubts over the supply given that the OPEC nations cut supply by 1 m barrels per day during the last meet, led by Saudi Arabia, which cut its production by 0.5 million barrels per day. Dropping temperatures in the traditionally cold European countries and the high consuming North American nations resulted in higher consumption and lower inventories, further pushing crude oil prices higher.

    The Indian markets witnessed selling pressure during the last week as the FIIs, major supporters of the bull run during the last year and a half turned net sellers to the tune of nearly Rs 5 bn. The markets witnessed volatile activity on the back of 3QFY05 earnings reports being announced by the tech heavyweights such as Infosys and TCS. But for one day after the FM's clarification on non-taxation of FII money, the weakness in the markets was evident.

    In line, with the overall market sentiments, Indian ADRs too witnessed mixed activity with Tata Motors and HDFC bank closing the trading week on a positive note, while tech majors, Infosys and Wipro led the pack of losers.

    Key Indian ADRs
      7-Jan-05 14-Jan-05 Change
    Infosys 66 64 -3.3%
    Tata Motors 11 11 1.1%
    Dr. Reddy's 18 17 -2.8%
    ICICI Bank 19 19 -2.4%
    Satyam 22 22 0.4%
    HDFC Bank 41 42 2.4%
    Wipro 22 21 -3.7%

    What's anticipated?

    The recent trend of the highly invested Foreign Institutional Investors (FIIs) turning into net sellers has raised apprehensions among investors. However, positive economic news on the IIP front and the declining inflation (inflation dropped below the 6% level to 5.8% as per the data available till Jan 1, could help sentiments in the near term. We believe investors should, at current levels, pick up stocks selectively based on fundamental valuations, rather that riding on the back of FII money. The Indian story holds good for the long term and the recent dips should be looked at as an opportunity to invest.

     

     

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