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US markets on a roll - Views on News from Equitymaster
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  • May 19, 2001

    US markets on a roll

    The US markets witnessed a cautious rally during the week. Early during the week, the Fed announced interest rate cuts, which fueled the buying interest. However, optimism in the markets was affected by several dismal quarterly earnings reports.

    Although the US central bank affected a 50 basis point rate cut in both federal fund rates and discount rates to propel the economic growth, it indicated the grim future outlook. This was due to weakening corporate earnings and falling investment spending. Consequently, the Fed has kept the door open for more rate cuts in future to reinvigorate economy.

    The news on the corporate front showed mixed trend. Applied Material Inc, BEA System and Ciena reported better than expected quarterly profits. On the other hand Hewlett Packard, Dell, Agilent Technologies and Gap Inc. posted a significant drop in earnings.

    VSNL’s stellar performance
    (Price in $) 12-May-01 19-May-01 Change
    VSNL 13.4 15.1 12.7%
    Dr. Reddy's 12.0 13.2 10.0%
    Wipro 33.6 36.3 7.9%
    ICICI 10.8 11.6 7.4%
    Infosys 70.3 74.5 6.0%
    Satyam Infoway 4.1 4.2 3.2%
    ICICI Bank 6.6 6.8 3.1%
    Silverline 4.1 4.1 -1.0%
    Rediff 3.0 2.9 -1.0%
    Satyam - 11.9 -

    The trend in Indian ADRs was positive in line with the US markets. VSNL and Dr. Reddy’s rallied while Silverline and Rediff lost ground.

    Disinvestment process is driving up the stock price of VSNL. The company is also considering a large dividend payout or buyback option before divesting the stake to strategic partner. The ADR was up by over 12% over the week.

    Pharma major, Dr. Reddy’s too attracted buying in the hopes of some of its drugs benefiting due to removal of DPCO. The company is planning to tap the US generic market for its two bulk drug products after it goes off patent. It is also aiming to launch a fourth molecule in the near term.

    Indian software major Satyam Computers listed on NYSE early during the week at a premium of over 20% compared to its domestic price. The company raised US$ 140.8 m through ADS to repay its outstanding debt and to acquire companies for inorganic growth. The strong buying interest on the first day of listing however failed to continue for rest of the week.

    The previous week was an excellent week for the US markets. The buying was observed on every dip. However, with more earnings guidance coming in from corporates, the sentiment is likely to remain mixed.

    US markets in demand
    Indices 12-May-01 19-May-01 Change
    Dow 10,821 11,302 4.4%
    NASDAQ 2,107 2,199 4.3%
    BSE 3,560 3,655 2.7%
    Nikkei 14,044 13,878 -1.2%
    Hang Seng 13,637 13,459 -1.3%



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