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Another lackluster week

Mar 1, 2003

US markets closed in the red for the current week. This is in contrast to the gains posted at close of last week. Volatility has been main feature of the current week. Start to the current week itself was weak the as the US and UK proposed a new resolution on Iraq to the Security Council. This new resolution may warrant the use of power to disarm Iraq. In addition to that investors were faced with increased pessimism on the economic front. Tuesday however the markets gained marginally. These gains were despite the fact that the latest consumer spending confidence pointed to a worrying picture. The latest reading on consumer confidence fell to 64 in February, the lowest since October 1993, from a revised 78.8 in January. On Wednesday however weakness returned to the US markets. Sentiments were dampened by rising crude oil prices due to growing fears of war, which seems closer than ever before. Low crude inventories have fueled the price rise further. The NASDAQ was mainly affected because of the earnings report from tech bellwether Hewlett-Packard indicating that sales for the current quarter would likely fall short of Wall Street estimates. The company reported healthy earnings that beat Wall Street estimates for the last quarter. But sales for the period however were well below expectations.

After witnessing a volatile half-week the markets rallied on Thursday, as there was some positive news on the economic front as well as due to lowering of the terrorist level. The US Commerce Department reported that durable goods orders rose 3.3% in January compared with a 0.2% decline in December. Economists had expected a climb of 1%. There was good news in the core of the report, too. New orders for non-defense capital goods excluding aircraft, a measure that economists track closely to see whether companies are boosting spending on new equipment, grew by 5.4%. Friday the markets witnessed a half hearted rally with the Dow and NASDAQ gaining only marginally. The positive sentiment was brought about by a before-hours report showing that the US economy grew at a rate of 1.4% in the fourth quarter of 2002, a bit more strongly than the government's initial estimate of 0.7%. Added to that University of Michiganís index of consumer sentiment for February showed an improved reading. The Chicago Purchasing Managers' index also came in better than expected at 54.9 in February, but was still lower than the 56 reading from January. Good economic news however failed to bring about the adequate response from investors and the US markets ended in the red for the week.

Indices22-Feb-031-Mar-03Change
FTSE 3,727 3,656 -1.9%
Nikkei 8,514 8,363 -1.8%
BSE 3,307 3,284 -0.7%
Hang Seng 9,251 9,123 -1.4%
NASDAQ 1,349 1,338 -0.9%
Dow 8,018 7,891 -1.6%
Dax 2,649 2,547 -3.8%

Global markets too witnessed weakness. The growing fears of war and lackluster economic outlook kept investors at bay. The German Dax and the British FTSE were the major losers. Back home also the mood was somber despite a relatively populist budget by the Indian finance minister. The Indian economy is reported to have grown by 4.4% in the period ending January 10th 2003. This is lower than what was expected. Services sector grew by nearly 7%, while the industrial sector saw a relatively good growth of 6%. The agricultural GDP however saw a 3.3% de-growth in the same period. Though the government has proposed doing away with dividend as well as long term capital gains tax this failed to enthuse the investors. For the whole week the Indian BSE Sensex fell by a marginal 0.7%.

(Price in US $)22-Feb-031-Mar-03Change
Satyam Infoway3.73.6-4.1%
ICICI Bank7.17.1-0.3%
Dr. Reddy's18.618.2-1.9%
Wipro30.030.41.4%
VSNL3.73.7-0.8%
MTNL4.54.2-4.7%
Infosys63.761.8-3.0%
Rediff2.32.1-7.4%
HDFC Bank16.115.7-2.4%
Satyam10.810.5-2.2%
Silverline0.50.50.0%

Indian ADRs saw a week of losses except on Friday when the budget measures cheered certain sectors. The major gainers were the software and banking counters. Software stocks were buoyed by the Indian finance ministerís decision to allow tax benefits to be extended to IT companies even after a change of management. Mergers and acquisitions in the IT sector could gather pace post the budget measures. Banking ADRs saw buying due to the announcement that FDI limit for foreign and private banks was being hiked from 49% to 75%. Despite the gains on Friday the Indian ADRs closed the week in the red. Volatility was one of the features current week and it may be witnessed in the coming weeks too as the geopolitical concerns intensify. The short-term recovery of the US economy as indicated by various economic numbers released this week may however lift investor sentiment if there is an absence of any adverse geopolitical news.

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