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Building on hopes - Views on News from Equitymaster
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  • Mar 15, 2003

    Building on hopes

    The US markets witnessed considerable volatility during the week but finally closed in positive zone for the week, thanks to the huge gains on Thursday. The US markets flared up on Thursday due to the postponement of the March 17 deadline for Iraq to meet the disarmament requirements. Consequently, Nasdaq added 2.7% for the week while Dow gained 1.5%, thus breaking a two-week losing streak.

    The markets opened Monday on a weak note. Infact, the Dow touched its five-month low (on the back of 171 point fall) as investors decided to get out of stocks amid fears of a possible military action by US against Iraq. While America’s intentions of going to war, with or without UN support, primarily dampened investor sentiments. Trading was also hurt by the increase in oil prices to levels not seen since 1990 and sluggish economic numbers. Market on Tuesday opened on a positive note as bargain hunters moved in to take advantage of Monday’s fall. However, Nokia, the wireless phone maker, issued an earnings warning indicating that its first quarter earning estimates might not be achieved and spoiled the party.

    On Wednesday, the markets saw a small bounce back after the selling seen in the past two trading sessions. However, on Thursday, with Nasdaq and Dow jumped on the news that Iraq had been given some more time to disarm. The Dow jumped 3.6% (250 points) while the Nasdaq closed 4.8% higher (points). Both the indices hit their five-month highs on the back of these gains. Investors overlooked weak employment and retail sales data, as they continued with the buying frenzy. The employment data showed that unemployment claims were at 420,000, well above the 400,000 benchmark, which signals a weak labour market. Also, retail sales were down 1.6%, four times the decline economists had expected. However, Friday’s trading seemed lackluster with the markets trading rangebound ahead of a weekend meet of the leaders from US, Britain and Spain.

    (Price in US $) 8-Mar-03 15-Mar-03 Change
    Satyam Infoway 3.3 3.4 4.2%
    ICICI Bank 6.6 6.7 0.8%
    Dr. Reddy's 18.4 18.3 -0.7%
    Wipro 28.6 28.4 -0.9%
    VSNL 3.5 3.3 -5.1%
    MTNL 4 4.2 3.2%
    Infosys 56.4 58.5 3.8%
    Rediff 2.1 2.1 0.5%
    HDFC Bank 15.2 15.2 0.0%
    Satyam 9.7 9.5 -2.6%
    Silverline 0.4 0.4 -14.0%

    It was a mixed week for the Indian ADR’s with no sector emerging as a clear winner. The technology sector was a mixed bag with Infosys and Satyam Infoway gaining 4.2% each, while Wipro and Satyam losing 0.9% and 2.6% respectively. The markets have been concerned about the impact, of a possible war between US and Iraq, on the Indian IT sector. If the war does take place, it could adversely affect the business sentiment in US, which could lead to reduced spending on the IT front. Among other smaller technology stocks, Rediff gained a marginal 0.5%, while Silverline lost a huge 14.0% during the week’s trading. From the telecom sector, VSNL closed 5.1% lower, while MNTL witnessed buying interest, which pushed the stock higher 3.2% in the week. The banking ADR, ICICI Bank, also closed in the positive, notching gains of 0.8% over the week.

    Indices 8-Mar-03 15-Mar-03 Change
    FTSE 3,492 3,602 3.2%
    Nikkei 8,144 8,003 -1.7%
    BSE 3,153 3,108 -1.4%
    Hang Seng 8,907 8,956 0.6%
    NASDAQ 1,305 1,340 2.7%
    Dow 7,740 7,860 1.5%
    Dax 2,432 2,403 -1.2%

    FTSE emerged as a winner among the global markets. Optimism was due to war with Iraq getting delayed as the six undecided members of the UN Security Council are working on a proposal to give Iraq 45 days to meet disarmament requirements. However, the week ahead for the US markets could be volatile with the outcome of the weekend meeting between leaders of US, UK and Spain and also due to a few big names releasing their quarterly earnings including Oracle, FedEx and Morgan Stanley.



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