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Global markets: Tentative gains

Feb 22, 2003

The week was a shortened one and it started on a positive note for the US markets. After rising on Tuesday (Monday being closed) US markets were weak in the next two days but managed to gain considerably on Friday. The impending war on Iraq and new economic data were the major issues that were considered during the week by investors. On Tuesday, US markets gained on hopes that the Iraq issue may actually get resolved peacefully. On Wednesday and Thursday however the markets succumbed to pessimism and poor economic data. Investors shifted their focus on economic data on Thursday. Investor sentiment dampened as one report stated that the wholesale price index has jumped 1.6% in January. This has led to fears of increased inflation. Jobless claims in the second week of February have risen far above the expected levels. The US government has also stated that the trade balance for December came in at a negative US$ 44 bn compared with expectations of a negative US$ 39 bn. This means that the US GDP growth may have to be revised lower than earlier expectations. US markets surged ahead on Friday though as both the Dow and the NASDAQ gained by over 1%. After initial jitters regarding the explosion at Staten Island, markets recovered handsomely as reports indicated that the incident was an accident.

Finally gains made on Tuesday and Friday pushed the US markets in the positive territory. The Dow gained 1.4% while the NASDAQ gained 3% during the current week. Investors seem to be hoping that the war is likely to be delayed and this has kept the markets buoyant. The coming week however may witness more action, as there are a slew of economic reports that are going to be released. But war concerns are likely to favour a generally bearish sentiment.

Indices 15-Feb-03 22-Feb-03 Change
FTSE 3,612 3,727 3.2%
Nikkei 8,702 8,514 -2.2%
BSE 3,223 3,307 2.6%
Hang Seng 9,202 9,251 0.5%
NASDAQ 1,310 1,349 3.0%
Dow 7,909 8,018 1.4%
Dax 2,674 2,649 -1.0%

As far as the global markets are concerned the FTSE reflected the positive sentiment of the US markets. The German Dax however lost marginally by 1%. The Indian Sensex closed strong for the week with nearly 3% gains. Other Asian markets also closed in the positive territory. Though the sentiment seems to be fairly optimistic we would like to point out that the threat of war is still not over and this may bring disappointment in the near future.

(Price in US $) 15-Feb-03 22-Feb-03 Change
Satyam Infoway 3.5 3.7 6.3%
ICICI Bank 7.0 7.1 2.1%
Dr. Reddy's 19.1 18.6 -2.4%
Wipro 29.2 30.0 2.6%
VSNL 3.5 3.7 8.4%
MTNL 4.4 4.5 0.5%
Infosys 65.1 63.7 -2.1%
Rediff 1.9 2.3 23.0%
HDFC Bank 15.3 16.1 5.0%
Satyam 10.2 10.8 5.9%
Silverline 0.5 0.5 -3.8%

Indian ADRs largely gained in the current week, major gainers being VSNL, HDFC Bank and Satyam Infoway. HDFC Bank is almost near its 52-week high. VSNL on the other hand gained strongly on Friday due to news regarding a proposed VRS to be announced in the coming week. Software major Infosys was the only loser among software counters; this is despite the fact that software stocks exhibited considerable volatility during the week. For the coming week the Indian ADRs are likely to remain volatile and there may be some profit taking in the major gainers this week like VSNL and HDFC Bank.

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