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Global markets: Down one, down all

Jan 31, 2004

Following the Fed announcement and fourth quarter GDP numbers, macroeconomic issues took center stage and weighed large on the US markets this week. Not enthused by the GDP growth rate (US fourth quarter GDP grew 4% as against an anticipated 4.8%) and unclear statements from the Fed, investors decided to book profits during the week. Thus for the week ending January 30, while Nasdaq lost nearly 3%, Dow edged lower by 1%. On the back of robust reports from some major companies, US indices made a sharp comeback on Monday and a broad based rally was witnessed, which pushed the indices to 30 month high. However, profit booking that was almost overdue, finally came to the fore on the next two days as investors decided to cash in on the rally that was witnessed on Monday and on a broader level for most of December and early January. As a result both the benchmark indices ended lower the next two days.

Wednesday’s decline was further aggravated by the Fed announcement, which send out signals that it would hike rates sooner than expected. The effect of the same loomed large on Thursday also, but a late wave of blue chip buying helped Dow to break the two-day losing streak. Weaker than expected fourth quarter GDP growth rate put some pressure on the markets on Friday, but the indices recovered towards the close on account of robust results from some major companies, thus ending the day marginally in the red. Thus, while the indices closed lower for the week, investors can gain solace from the fact that they ended higher for the month.

Indices 23-Jan-04 30-Jan-04 Change
NASDAQ 2,124 2,066 -2.7%
Hang Seng 13,751 13,289 -3.4%
Nikkei 11,069 10,784 -2.6%
BSE-Sensex 5,817 5,698 -2.0%
FTSE 4,461 4,391 -1.6%
Dow 10,568 10,488 -0.8%
Dax 4,152 4,059 -2.2%

Indices all across the world experienced weakness during the week. The European indices, which closely follow the happenings in the US economy, experienced weakness on account of weaker than expected US GDP fourth quarter growth rate. With the world’s largest consuming economy failing to grow at a robust rate, investors feared that lower spending might hurt corporate profits. Weakness persisted across the Asian markets also as investors decided to book profits amidst fears of subdued US consumer spending.

(Price in US$) 23-Jan-04 30-Jan-04 Change
HDFC Bank 32.5 29 -10.8%
Wipro 57.1 50.7 -11.2%
Satyam 27.5 23.8 -13.5%
Infosys 93.5 88.4 -5.5%
Satyam Infoway 8.0 7.1 -11.3%
Dr.Reddy's 31.7 30 -5.4%
Silverline 1.1 1.1 0.0%
ICICI Bank 16.7 15.0 -10.2%
Rediff 8.6 8.6 0.0%
MTNL 7.1 7.0 -2.0%
VSNL 7.6 7.4 -2.6%

On the back of profit booking witnessed both on the US as well as Indian bourses, Indian ADRs ended lower for the week. Prominent among the losers were banking and tech stocks. Despite posting strong third quarter results, most of the ADRs have been experiencing weakness. Perhaps an indication of the fact that the robust results were already being anticipated and investors are looking to cash in on the rally that has been witnessed for most part of last year and early January. Software major Satyam lost the most and ended 14% lower. Wipro also recorded a double-digit decline. Banking majors HDFC Bank and ICICI Bank also lost in the region of 10%.


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