Jun 8, 2002|
Accounting practices concern markets
Corporate America and war fears worried the US markets. Both the key indices, Dow and NASDAQ touched an eight-month lows. Better than expected economic data failed to cheer the markets marred by companies’ unreliable accounting practices.
Early during the week, nervousness spread by Tyco Inc, on departure of its chairman, intensified investors worries about mistrust of companies’ top management and finances. Knight Trading Group too joined the list of companies under investigation. The company has been alleged to place its own orders for stock before carrying out customer orders.
Earnings reports were also not so exciting. Xilinx issued a quarterly forecast that disappointed the Street and the company indicated to generate half of its business to come in the last month of the quarter. Intel too cut its revenue forecast for the quarter on slack demand from Europe.
Economic data to an extent were indicating that the US economy is coming up from the recession. US manufacturing sector expanded in May at its fastest pace in over two years and services sector too posted a healthy growth. After an 18-month slump driven by a record runoff of inventories, factories this year have boosted production to meet increases in new orders. Data from the US labour markets too showed some improvements. The unemployment rate dropped to 5.8% in May from 6% in the previous month and the number of workers on US payrolls grew by 41,000 in May.
Silverline beats the trend
|(Price in $)
Indian ADRs in general recorded sharp losses. Internet ADRs were the major losers. Silverline, ICICI Bank and MTNL however managed to outperform the markets. Silverline’s ADR soared by over 16% on its announcement to hire Taib Bank for financial and strategic restructuring of the company.
Infosys was down marginally. Infy’s new back office unit, Progeon, announced a five-year, US$ 30 m contract with the US based firm, GreenPoint Mortgage. Progeon will provide GreenPoint, back office financial services to help it cut costs. This is the first contract the company has received for its new venture into business process outsourcing (BPO). IT enabled services market, is expected to grow at a CAGR of 47% for the next six years to US$ 19 bn. This reflects the growth potential for BPO market.
Dr. Reddy’s accumulated some gains, after the company declared splendid results. The company posted a strong 65% growth in total income to Rs 17 bn for the year ended March 2002. International sales contributed 61% to the total turnover of the company. During the year its net profit margins doubled to 30% compared to previous year. Its mega drug, fluoxetine (40 mg capsules) and a successful integration of Cheminor, drove the company’s performance.
BSE stands out
Investors seems to be losing confidence from the markets due to concerns over reliability of corporate accounts and lingering war fears. Outlook from frontline companies is also not so impressive and economic data is reflecting a slow recovery process. The trend in the markets is likely to be cautious in the coming week, in absence of positive news flow.
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