Mar 31, 2001|
Indian ADRs loses sheen
The tech heavy NASDAQ gave up a gain of 15% over a last month. The index crumbled by more than 25% since the beginning of the year, shaking investor confidence. Investor wary of over valued tech stocks shifted their buying interest to defensive stocks.
Nevertheless, blue chips stocks also joined the cue of companies giving earnings warning. International Paper (the world’s largest paper and forest product company), Coco-Cola Enterprise Inc. and Ingersoll-Rand cut quarterly earnings estimate and projected a drop in revenues in the coming year. The rally in the markets which was started early during the week was halted by second profit warning from the telecom equipment maker, Nortel Networks. Communications chipmaker PMC-Sierra Inc. also announced job cuts and disappointing results in the face of weak demand and order cancellations. This again re-affirmed the bleak outlook for the tech sector.
The outlook on the economy front was mixed. The Conference Board’s barometer of Consumer Confidence Index rose to 117 in March from 109 in February, higher than a forecasted drop of 105. While the growth rate of GDP was revised down to 1% in the face of weaker consumer spending. Also, the barometer of business index fell by more than 8 points in March to 35. An index below 50 signals a contracting manufacturing economy.
Indian tech ADRs, save for Wipro lost luster on the back of gloomy outlook for the technology sector. ICICI group companies were in limelight.
|(Price in $)
Both ICICI and ICICI Bank inched up impressively on announcement of restructuring. ICICI has made a strategic divestment of stake in ICICI Bank. The institution aims to utilise the gain in writing off the non-performing assets. This would surely help ICICI in improving its image and showing a fair picture of the accounts.
Nortel’s earnings warning hit the sentiment in Infosys. Nortel is one of the largest clients of the company. Wipro however managed to accumulate some buying support.
VSNL displayed a huge volatility during the week. Selling pressure in the last two days resulted in the stock losing all its gains. The company has increased the bandwidth capacity by 75% to 1,470 megabits per second. It has also indicated that it will speed up the launch of all India Internet services. On the disinvestment front also news are positive. Canadian telecom major Teleglobe Inc. is considering bidding for 25% of government’s stake in VSNL. With the deadline for closing of bids scheduled for April 10, VSNL is expected to finalise its decision soon.
Dow stands out
Globally the tech sector is affected by weakening demand, resulting in disappointing future outlook by the tech majors. Investors are scared of putting fresh money into the markets after having lost considerably. The only catalyst for the markets and the tech sector per se is the growth in the economy, which could bring some cheer.
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