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Global markets: Economic concerns prevail

May 24, 2003

US markets were in the red for the current week. This was the first time after about a month when the US markets closed weak. The week started on a negative note with both the Dow and the NASDAQ shedding heavily on Monday. This was primarily because of the selling pressure in the drugs sector. US supreme court ruling gave a green signal to lower the prices of prescription drugs. The falling dollar also fueled the weak investor sentiments. On the next two-days, markets remained lacklustre. Hewlett-Packard announced better than expected quarterly results on Tuesday. Also the company gave a positive outlook for the next half of the current fiscal. On another front, after a Florida court overturned a ruling against the tobacco industry, tobacco company stocks gained ground on the Dow. However, investor sentiments were hampered on account of Fed chief's acknowledgement of continued weakness of US economy.

Thursday however provided some respite to the US indices on account of a US$ 350 bn tax cut package announced by US president George Bush. This was passed by the congress on Friday. This package is likely to provide an incentive to increase investments and corporate spending activity. Better earnings reports from some retailers and technology companies added further strength to the US markets. However the markets closed in the red for the week. Next week will probably see investor focus on economic reports and this may lead to cautious sentiments.

Indices 17-May-03 24-May-03 Change
FTSE 4,049 3,980 -1.7%
Nikkei 8,117 8,185 0.8%
BSE 3,057 3,049 -0.3%
Hang Seng 9,093 9,304 2.3%
NASDAQ 1,539 1,510 -1.8%
Dow 8,679 8,601 -0.9%
Dax 2,989 2,823 -5.6%

Asian markets were the only gainers among the major world markets. Gains were largely on account of the fact that the stock prices of major Asian exporters rose sharply on the indices. This is due to the hopes among the exporters that exports to US markets may see a sudden jump. European indices however lost significant ground. Dax of Germany lost heavily by about 6%. The Europe's largest economy Germany is nearing a stage of deflation at a faster pace and this increased the concerns about the growth in the economy going forward. Indian Indices remained marginally in the red in the current week.

(Price in US $) 17-May-03 24-May-03 Change
Satyam Infoway 6.9 5.6 -18.4%
ICICI Bank 6.5 6.3 -2.3%
Dr. Reddy's 18.2 18.0 -1.3%
Wipro 20.7 18.5 -10.5%
VSNL 3.6 3.5 -3.0%
MTNL 4.2 4.0 -3.8%
Infosys 42.8 40.6 -5.1%
Rediff 5.2 4.5 -12.8%
HDFC Bank 16.6 17.1 2.9%
Satyam 8.8 7.9 -9.5%
Silverline 1.4 1.4 -2.9%

Barring HDFC Bank, all the ADRs were in the red for the week. In India, banking stocks gained ground in the current week. Similar to this trend, banking ADRs also gained strength. Post the Infosys guidance given for FY04, concerns regarding software stocks is on a rise. While Wipro and Satyam lost about 10%, Infosys was down by 5%. Rediff and Sify continue to lose and were among the major losers.

The US victory over Iraq seems to be fading away from the minds of the investors and they seem to be more concerned about the growth of US economy going forward. Also threat of possible deflation facing the world's largest economies seems to be causing concerns within the investor community. With Europe almost on the verge of a recession and going towards a state of deflation, concerns have intensified going forward.

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