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US markets cool down - Views on News from Equitymaster
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  • Mar 16, 2002

    US markets cool down

    After having witnessed a strong rally in the previous week, the US markets locked in profits at higher levels. While the NASDAQ lost 3% over a week, the Dow ended flat. Corporate earnings concerns capped the gains of the markets, ignoring better than expected economic data.

    Early during the week telecom majors issued bleak earnings forecast. Lucent cut its quarterly revenue estimates and indicated to make profits only in fiscal 2003. Nokia too warned of weaker network equipment sales on the back of subdued demand. Stocks of WorldCom and Qwest Communication suffered as US regulators launched inquiries into the companies’ accounting practices. Oracle, although posting February quarter profits in line with market expectations, it indicated lower revenues in the coming quarter due to slump in tech spending.

    Economic data offered some signs of relief to the markets. The University of Michigan’s consumer sentiment index jumped to 95, its highest level since December 2000. US industrial output also rose by 0.4% in February, its strongest gain since mid 2000. First time jobless claims fell by 3,000 to 377,000 for the week ended March 9, showing a continued downward trend in number of jobless workers. Retail sales were however, slack with a marginal rise of 0.3% in February, much below 0.9% forecasted by economists. The Federal Reserve again reiterated that economic recovery is under way but there is only a gradual recovery in the business activity.

    MTNL beats the trend
    (Price in $) 9-Mar-02 15-Mar-02 Change
    MTNL 5.9 6.3 5.9%
    Silverline 2.4 2.5 4.6%
    VSNL 7.0 7.1 1.0%
    Satyam Infoway 1.7 1.7 0.0%
    ICICI 8.0 8.0 0.0%
    Dr. Reddy's 22.0 22.0 0.0%
    Satyam 13.2 13.2 -0.1%
    Wipro 41.7 39.8 -4.4%
    ICICI Bank 6.5 6.2 -4.8%
    HDFC Bank 16.5 15.7 -5.0%
    Infosys 72.5 64.6 -10.9%
    Rediff 1.3 1.2 -12.1%

    Indian tech ADRs too followed the NASDAQ trend and lost significant gains. Infosys was the major loser. Old economy stocks meanwhile ended flat and MTNL outperformed by recording gains of 6% over a week.

    Rediff tumbled by 12% during the week. Towards the fag end of the week, the company announced its upbeat financial outlook for the March quarter. It has forecasted revenues in the range of US$ 6.6 m to US$ 6.8 m (US$ 6.3 m in the previous quarter). Rediff is also expecting operating loss of in the range of US$ 0.7 m – US$ 0.8 m, lower than US$ 1.6 m posted in the December quarter.

    Wipro, one of the most highly valued stocks among the Indian ADRs, slumped by 4%. The company entered into agreement with Texas Instruments for extending development support for 2.5G and 3G mobile devices, personal digital assistance and mobile Internet appliances. It also announced the commercial availability of its Home Gateway suite. Some of the applications enabled by the Home Gateway device are virtual private network connectivity, Internet sharing, video on demand, IP telephony and home security and surveillance. These new projects and products are expected to enhance Wipro’s revenues in the coming years.

    Dr. Reddy’s announced its first overseas acquisition of BMS Laboratories and Meridian Healthcare, UK for 9.1 m pound. Both the companies have fully integrated facilities for oral solids, liquids and packaging in UK with revenues of 8 m pound in 2001. This acquisition would enable Dr. Reddy’s to enter the UK generics market through BMS’ established marketing network. The stock however, failed to attract demand.

    Global markets, cash in profits
    Indices 9-Mar-02 15-Mar-02 Change
    Dax 5,360 5,401 0.8%
    Dow 10,572 10,607 0.3%
    FTSE 5,286 5,293 0.1%
    Hang Sang 11,233 11,210 -0.2%
    BSE 3,657 3,618 -1.1%
    Nikkei 11,886 11,648 -2.0%
    NASDAQ 1,930 1,868 -3.2%

    The markets globally took a break after having run up sharply in the last fortnight. Even though, the US economy is showing signs of a turnaround, business activity is likely to rise gradually. In the short term, outlook from companies would continue to drive the market sentiment.



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