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Result season to decide fate

Apr 13, 2002

Rising crude oil prices marred sentiment early during the week. However, recovery was evident during the later part inline with the cool off in the energy prices. Both the Dow and NASDAQ ended the week with modest losses. Economic data continued to show slow but steady signs of recovery. The combination of moderate sales growth and low inflation levels settled concerns over rise in interest rate by Federal Reserve. Concerns over accounting practices concerns continued to cloud sentiment on the NASDAQ. This was evident from rise in IBM on the last trading session, as the SEC ended its preliminary probe in to the accounting practices of the computer major. Dell computers marched ahead during the week after the company forecasted to report higher revenues in the current quarter. Telecommunications stocks also recovered from the last week’s battering. Though the sentiment seems to be improving markets remain jittery about forthcoming quarterly announcement and continued violence in the Middle East.

Merrill Lynch stock fell as the company came under the probe of the New York State attorney’s about the state of its Wall Street research. Pharmaceutical stocks witnessed selective buying interest.

Economic data continued to show signs of steady recovery. Though wholesale prices index rose by a percent, analysts opined that the rise was mainly on the back of higher energy prices. Back of the envelope calculations, indicated that GDP grew by an unsustainable 5% in the last three months. However, slower expansion in the US service sector hurt the market mood. This is mirrored in the non-manufacturing index, which fell to 57.3 in March from 58.7 in February.

Tech gains ground
(Price in $) 6-Apr-02 12-Apr-02 Change
Dr. Reddy's 23.0 22.7 -1.1%
MTNL 6.2 5.9 -4.1%
Infosys 66.4 69.0 4.0%
HDFC Bank 15.3 15.3 0.3%
Wipro 36.7 36.5 -0.4%
ICICI 7.8 7.7 -1.8%
Satyam 12.1 12.1 0.3%
Rediff 1.2 1.1 -8.3%
VSNL 7.3 7.4 1.1%
ICICI Bank 6.1 6.2 2.3%
Satyam Infoway 1.4 1.3 -4.5%
Silverline 1.9 1.8 -3.7%

Most of the Indian tech ADRs ended the week in red. Rediff and Satyam Infoway were the major losers. ICICI and ICICI Bank received the court approval for the merger during the week. However, ICICI ended the week in red. Infosys was the major gainer after the company declared its quarterly results. The company also issued encouraging profit guidance.

MTNL remained volatile during the week. The optimism is on the back of the forthcoming divestment program of the government. The company is also expected to generate higher revenue growth on the back of a significant rate cut in domestic long distance telephone charges. The company has also indicated to set up 1,000-seat call centers in two major cities, Mumbai and Delhi. MTNL will transfer excess employees to these call centers, which would improve its productivity and save employee cost. However, comparatively lower growth in the subscriber base of the company is raising concerns for the company.

War concerns cloud optimism
Indices 6-Apr-02 12-Apr-02 Change
Nikkei 11,335 10,963 -3.3%
BSE 3,501 3,511 0.3%
FTSE 5,234 5,161 -1.4%
Dow 10,272 10,190 -0.8%
Hang Sang 10,831 10,710 -1.1%
Dax 5,261 5,189 -1.4%
NASDAQ 1,770 1,756 -0.8%

Mounting concerns of Israel-Palestine conflict has weakened market sentiment globally. This is also reflected from gold prices, which touched two years high. Amidst prevailing uncertainty in the capital markets, investors have opted to go for safe bet (gold). The near term outlook for the US markets is likely to get influenced by quarterly forecast from companies.

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