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Global Markets: War ravaged - Views on News from Equitymaster
 
 
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  • Mar 29, 2003

    Global Markets: War ravaged

    US markets ended in the red for the week. The Dow and the NASDAQ fell by over 4% for the week. Continuing war fears as well as poor economic outlook has forced an investor retreat form the equity markets. Fall in the US markets began from the first day of the week on fears of the war extending more than expected. On Tuesday however US markets rallied though only marginally on rumours of an uprising against the Iraqi regime in Basra, one of Iraq’s largest cities. Also rumours that the Iraqi leader, Saddam Hussein is negotiating surrender gave further fillip to the markets. But investors were surprised on Tuesday by the news that the US Senate reversed course and decided to cut more than half of President Bush's proposed US$ 726 bn tax cut. This limited the Tuesday rally.

    Wednesday was another day of declines as economic numbers disappointed. Orders for goods from U.S. manufacturers in February fell 1.2%, the largest fall since November. In addition, new home sales in February fell to an annual rate of 854,000 units, from a revised rate of 929,000 units in January. For the rest of the week the negative sentiment followed with the US markets falling on Thursday and Friday.

    Indices 22-Mar-03 29-Mar-03 Change
    FTSE 3,861 3,709 -4.0%
    Nikkei 8,003 8,280 3.5%
    BSE 3,218 3,116 -3.2%
    Hang Seng 9,179 8,863 -3.4%
    NASDAQ 1,422 1,370 -3.7%
    Dow 8,522 8,146 -4.4%
    Dax 2,715 2,521 -7.2%

    All the major global markets saw a decline indicating that the war uncertainties have taken a toll on investors. The Japanese Nikkei however bucked the trend and actually rose strongly for the week. With the war in Iraq raging without a possible end in sight in the near term, global markets may witness further pressure.

    (Price in US $) 22-Mar-03 29-Mar-03 Change
    Satyam Infoway 3.7 3.9 5.7%
    ICICI Bank 6.7 6.5 -4.2%
    Dr. Reddy's 19.3 19.5 1.0%
    Wipro 31.5 29.0 -7.9%
    VSNL 3.3 3.2 -3.6%
    MTNL 4.1 4.1 0.5%
    Infosys 67.2 64.0 -4.8%
    Rediff 2.3 2.9 23.9%
    HDFC Bank 15.7 15.8 0.3%
    Satyam 9.9 9.0 -8.7%
    Silverline 1.8 1.7 -7.8%

    Apart from selective buying in stocks like Sify and Dr Reddy’s the performance of Indian ADRs remained lackluster. In fact software counters like Satyam, Infosys and Wipro were the major losers for the week. With the war raging in Iraq and the growth of the US economy slowing down there are fears that Indian software companies may lose a significant part of their revenues form US. Already there are signs that IT budgets of US companies are under pressure, since Indian software companies derive a significant part (around 50%-55%) of their revenues from the US hence the concerns. Going forward Indian ADRs are likely to witness further weakness mirroring the prospects of the US markets.

     

     

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