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Global: Nothing special! - Views on News from Equitymaster
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  • Feb 12, 2005

    Global: Nothing special!

    The week ended February 12, 2005 saw markets round the globe continue their move off the beaten track, as market participants remained apprehensive about the course of the US economy, inflation and interest rates. However, decline in crude prices provided some respite and most of the major global indices closed the week with gains ranging between 1% and 2%.

    Key global indices
      04-Feb-05 11-Feb-05 Change
    Hang Seng 13,585 13,846 1.9%
    Nikkei 11,360 11,554 1.7%
    CAC 3,958 4,017 1.5%
    DAX 4,339 4,388 1.1%
    Dow 10,716 10,796 0.7%
    BSE-Sensex 6,618 6,634 0.2%
    NASDAQ 2,087 2,077 -0.5%

    As mentioned above, one of the key reasons for the positive bias in global markets was the decline in crude prices, which fell below the US$ 45 on Monday. This decline was on the back of higher US inventories, milder winter season and weakening global demand led by China, which had led to the US markets closing Monday on a positive note.

    However, the next two days (Tuesday and Wednesday) were marked by volatility, much on the NASDAQ, due to Cisco's earnings announcements that missed market expectations. Thursday, however, marked gains for these markets as news of the narrowing US trade gap brought some cheers to the market participants. Further, reports from the labour department showing a reduction in jobless claims also boosted investor sentiment.

    Finally, Friday saw the Dow hit its 2005 peak for the second straight session as blue chips rallied and tech stocks remained strong. The week also saw one of the major corporate decisions of recent times when HP's Carly Fiorina stepped down from the CEO position of the company, citing differences with the company's board with regard to the execution of business strategies.

    Key Indian ADRs
      04-Feb-05 11-Feb-05 Change
    Infosys 69 74 7.5%
    Satyam 24 26 5.4%
    Wipro 22 23 4.1%
    Dr. Reddy's 17 18 2.7%
    ICICI Bank 21 21 2.5%
    Tata Motors 11 12 2.1%
    HDFC Bank 45 45 -0.4%

    Despite all these apprehensions surrounding the global markets, the Indian ADRs had a strong week with the tech majors - Infosys, Satyam and Wipro - leading the gainers' pack (in that order). This seemed a consequence of rising investor optimism with regard to these companies' future growth. Readers should note that these companies have reported better than expected results in the recently concluded third quarter of FY05, reporting decent topline growth and margin stability despite the over 4% appreciation of the rupee vis--vis the US dollar. And with offshoring becoming mainstream, we expect these companies to be among the biggest beneficiaries in the future.



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