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US markets waiting for direction

Mar 30, 2002

The US markets ended flat for the week, as investors opted to adopt a wait and watch policy amidst dwindling corporate profits. Economic data are showing some signs of recovery, which concerned market movers about a possible interest rate hikes by the Federal Reserve. Morgan Stanley, the key investment banker, reported a 21% drop in quarterly profits. The decline in profits was contributed by its sluggish merger advisory business. The investment banker still topped expectations and forecasted a pickup in business in the second half of the year in line with economic recovery. Commodity companies including steel makers rallied in anticipation of price hikes and hopes of rise in industrial demand.

Economic data continued to show positive signals. The consumer confidence index bolted to its highest level since August. Sales of new US homes rose 5.3% in February, reversing a big drop recorded in the previous month. US consumer spending, which drives the economy, posted its highest gains in February to 0.6% led by a surge in car sales. The US economic growth was revised to 1.7% in the fourth quarter, faster than 1.4% rate previously forecasted.

VSNL rides higher
(Price in $)22-Mar-0229-Mar-02Change
ICICI Bank6.26.55.2%
Dr. Reddy's21.722.11.9%
HDFC Bank15.715.4-2.2%
Satyam Infoway1.61.6-3.1%

Indian tech ADRs lost ground and Wipro was the largest loser. Old economy stocks, meanwhile soared higher. Most of the ADRs were trading with thin volumes throughout the week.

VSNL was the star performer of the week (up 10%). The company has recently entered into domestic long distance telephony (DLD). This will to an extent compensate for the loss of revenues due to end of its monopoly in international telephony with effect from April 1, 2002.

ICICI group companies were in demand. The Indian court will decide its ruling on the merger of ICICI and ICICI Bank on April 11, 2002. Although, the order will be passed in the next financial year, ICICI is confident of implementing the merger with effect from March 31, 2002.

Global markets stays on sidelines
Hang Sang 10,863 11,033 1.6%
Dax 5,366 5,397 0.6%
FTSE 5,251 5,272 0.4%
NASDAQ 1,851 1,858 0.4%
Dow 10,428 10,404 -0.2%
BSE 3,516 3,469 -1.3%
Nikkei 11,345 11,025 -2.8%

The US markets have remained dull since the last fortnight despite economic data reflecting a sign of revival. March quarter is near to end and the corporate earnings outlook will start pouring in. This could help in giving some direction to the markets, which is lacking trigger.

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