Jun 15, 2002|
US markets losing strength
The US markets continued to slide amidst a stream of negative news. Investor concerns for sluggish corporate earnings, unreliable accounting practices and unimpressive economic data spread nervousness in the markets.
After a heavy sell-off in tech stocks, it was the time of pharma companies to be hit by downbeat earnings news. Abbott Laboratories cut its profits forecast for the quarter, citing manufacturing problems and declining sales of its obesity drug. In telecom, Lucent too indicated that the industry is unlikely to see a recovery in the near term. The company warned that its revenues would decline vis-à-vis the previous quarter on slowdown in demand. Nokia and Motorola, on the other hand, expect to meet their earnings target. Tech counters however, failed to cheer the news.
On the economy front, retail sales recorded its sharpest monthly decline since November, hurt by slower auto sales and lower prices at the gas pumps. Overall sales dropped by 0.9%. Excluding autos, sales fell 0.4%. Consumer sentiment index too fell to 90.8 in June from 96.9 in May. This news overshadowed reports, which showed higher production in the US factories. The production rose for the fifth straight month in May by 0.2% and the capacity utilization too edged up to 75.5%.
Tech ADRs beat the trend
|(Price in $)
Indian tech ADRs rebounded sharply after the war fears between India and Pakistan receded. Satyam was the star performer. Telecom PSUs were also in limelight. Silverline and Sify were the only losers.
VSNL climbed higher after the company ended the controversy over its decision to invest Rs 12 bn in Tata Teleservices Ltd. The company will go ahead with its plan. However, the quantum and valuation of the proposed investment will be decided by a committee, which will include at least one government director.
After having remained weak for the last few weeks, Infy gained over 3%. The company said that it has not suffered any loss of business as a result of border tensions between India and Pakistan. Infy maintained its earnings growth target of 17-20% for FY03. Meanwhile, it also abandoned its plans to set up a software development center in China and instead it has short-listed two other countries for the purpose.
BSE strengthening further
Over the last fortnight trend in the world markets clearly reflects cautiousness. The US markets have fallen again near the post September 11 levels. Investors seem worries about expected recovery in corporate earnings. The markets could shed further gains in absence of any positive news on this front.
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