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Global markets: Optimistic sentiments - Views on News from Equitymaster
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  • May 31, 2003

    Global markets: Optimistic sentiments

    US stock markets traded strong in the current week with major indices reaching higher levels for 2003. While the NASDAQ gained about 6% Dow also strengthened by 3% in the entire week. Trading for the whole week was carried out for only four days as Monday was a holiday for the US financial markets. Investor sentiments remained stronger during the week on the hopes of recovery in the US economy in the second half of the current financial year backed by positive economic reports.

    The week started (Tuesday) on a positive note on the back of encouraging report on consumer confidence index and housing reports. This kept investor confidence higher even on Wednesday and better than expected results from couple of companies added further to the sentiments. Optimism about improvement in revised GDP growth to be announced on Thursday kept the sentiments on higher side.

    On Thursday however, Dow was down on account of profit booking. Buying in technology and semiconductor chips led to the gains on NASDAQ. That apart, upward revision of first quarter GDP growth by the Commerce Department and reduction in unemployment numbers further lifted the indices. Hopes of an economic resurgence were strengthened by the fact that the regional manufacturing report (from Chicago) saw an improvement in the manufacturing sector. Next week will see economic reports in the services sector and national manufacturing sector and this will drive the sentiments going forward.

    (Price in US $) 24-May-03 31-May-03 Change
    Satyam Infoway 5.6 5.5 -2.0%
    ICICI Bank 6.3 6.7 6.3%
    Dr. Reddy's 18.0 19.3 7.3%
    Wipro 18.5 19.5 5.7%
    VSNL 3.5 4.0 13.3%
    MTNL 4.0 4.1 0.7%
    Infosys 40.6 44.2 8.9%
    Rediff 4.5 4.8 6.9%
    HDFC Bank 17.1 17.0 -0.4%
    Satyam 7.9 8.4 5.3%
    Silverline 1.4 1.3 -3.7%

    World over, stock markets remained positive in the current week. Major indices worldwide gained strength. The major gainers among them were NASDAQ (6%), Dax (6%) and BSE Sensex (4%). Asian indices strengthened as the WHO lifted its caution against the travel to Hong Kong as the number of SARS victims saw a decline and this lifted the markets. Also a falling yen eased the pressure on the exporters and this added to the gains on the Nikkei. However concerns about the economic growth in the major economies will act as a cause of concern going forward.

    Indices 24-May-03 31-May-03 Change
    FTSE 3,980 4,048 1.7%
    Nikkei 8,185 8,425 2.9%
    BSE 3,049 3,178 4.2%
    Hang Seng 9,304 9,487 2.0%
    NASDAQ 1,510 1,596 5.7%
    Dow 8,601 8,850 2.9%
    Dax 2,823 2,983 5.7%

    Indian ADRs also remained strong for the week except for Silverline Technologies (4%), Sify (2%) and HDFC Bank (marginally down). Software ADRs, which were in the red last week, saw some buying activity this week. This came along with the gains observed in the technology stocks on NASDAQ. Major gainers were Infosys (10%), Satyam (6%) and Wipro (6%). However concerns regarding the software sector continue going forward. VSNL was the top gainer and strengthened by 13%. VSNL has entered in to an interconnectivity agreement between BSNL and MTNL in India. This seems to have triggered the buying activity in the stock.

    Despite the gains observed on the major indices worldwide on the hopes of economic recovery in the second half of the current financial year, the current deflationary concerns still looms large and any weak reports regarding the economy in the next week may dampen investor sentiments in the short term. Down in India, the rally in banking stocks may take a beating as the government has announced that it would take back capital from PSU banks at current market price and not at par. However overall there seems to be optimism among investors in the domestic market.



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