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US markets: How much is too much…

Apr 17, 2004

While a slew of positive earnings reports continued to hit the US markets, concerns over geopolitical uncertainties and first signs of overheating of the US economy, loomed large over the week. As a result, for the week ending April 16, 2004, the US benchmark indices showed mixed results. While the Dow managed marginal gains, tech laden Nasdaq edged lower by 3%. Hopeful that the first quarter earnings from US Inc would be positive, the markets started the week on a positive note and they staged a rally on Monday. However, they remained jittery over the next two days, as the fact that the earnings have been robust raised concerns over interest rates and inflation. The fact that the markets had gained over the last few sessions also added to the woes.

With investors a little disappointed with earnings reported by tech stocks and the fact that these stocks were more vulnerable to geopolitical concerns resulted in the Nasdaq witnessing declines over the last two trading days of the week. The Dow, helped in part by drug stocks and by virtue of it being a little diversified, however gained during the same period, but the declines earlier in the week meant that it could notch up only marginal gains for the week. With no economic news of real importance due next week, attention would be focused on Monday's one report on leading economic indicators.

Indices 9-Apr-04 16-Apr-04 Change
NASDAQ 2,053 1,996 -2.8%
Hang Seng 12,909 12,458 -3.5%
Nikkei 11,898 11,825 -0.6%
BSE 5,838 5,863 0.4%
FTSE 4,490 4,537 1.0%
Dow 10,442 10,452 0.1%
Dax 4,014 4,034 0.5%

As far as the major indices across the world are concerned, while selling pressure was evident among major Asian indices, European indices ended up higher. Indian benchmark index, BSE, however bucked the trend among Asian indices and ended up marginally higher for the week. Strong results by tech bellwether Infosys as well as a forecast of normal rains by the IMD (Indian Meteorological Department) were some of the primary reasons behind the robustness. European indices on the other hand, gained on the back of buying interest among defensive stocks such as utilities and FMCG, as investors took an exception to tech stocks following the sector's decline in the US markets.

(Price in US$) 9-Apr-04 16-Apr-04 Change
Dr.Reddy's 23.2 22.0 -5.1%
HDFC Bank 30.7 31.0 1.0%
ICICI Bank 16.0 16.1 0.6%
Infosys 83.8 84.9 1.3%
MTNL 8.0 8.3 3.8%
Rediff 14.1 12.2 -13.5%
Satyam 21.1 21.6 2.4%
Satyam Infoway 8.4 7.4 -11.9%
VSNL 8.6 8.2 -4.7%
Wipro 42.6 41.4 -2.8%

Among Indian ADRs, while banking and tech ADRs witnessed gains over the week, profit booking was evident among dotcom ADRs. Tech ADRs such as Infosys gained despite selling pressure among tech stocks on Nasdaq. This bears testimony to the strong fundamentals of the company. It announced its annual results earlier this week and gave strong forecast for the current fiscal and therefore the buying interest. The effect rubbed off on its peer Satyam as well as the major gained 2% over the week. Banking ADRs also witnessed buying interest on the back of anticipation of good quarterly results as the credit off take in the Indian markets remained robust over the quarter. Among the losers, a bout of profit booking was witnessed among dotcom majors. Rediff suffered the maximum and lost nearly 14% over the week. It should be noted that the ADR had appreciated a lot over the past few weeks on the back of its tie up with Yahoo. As a result, investors seemed to have capitalized on the gains and booked profits.

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