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Global markets: Lackluster week - Views on News from Equitymaster
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  • Jun 19, 2004

    Global markets: Lackluster week

    Profit booking among tech stocks clipped nearly 1% off the Nasdaq during the week ended June 18, 2004. Dow, on the other hand remained almost unchanged, thanks largely to gains in select blue chips.

    With both the benchmark indices showing divergent trends, there have been talks about the possibility of re-emergence of sector rotation strategy, whereby investors seem to be rotating their money from seemingly overheated tech stocks into defensive, high dividend paying sectors like industrials and transport, probably in anticipation of higher interest rates. A profit warning earlier in the week from a not so active Nasdaq component called Jabil Circuit gave investors an excuse to book profits in the tech laden Nasdaq and might have also led to weakness in the same. While low volumes has remained a bane in the markets for quite some weeks now, it is widely expected that the earnings season due next month would help bring back investors in droves.

    Indices 11-Jun-04 18-Jun-04 Change
    NASDAQ 2,000 1,987 -0.6%
    Hang Seng 12,396 11,856 -4.4%
    Nikkei 11,527 11,382 -1.3%
    BSE-Sensex 4,833 4,769 -1.3%
    FTSE 4,484 4,506 0.5%
    Dow 10,410 10,416 0.1%
    Dax 4,014 4,000 -0.3%

    Major indices across Asia largely remained in the throes of profit booking and closely followed their US counterpart. While investors did take some solace from Fed chairman's testimony earlier in the week, weakness in tech stocks at the fag end of the week largely contributed to the decline among Japanese and Hong Kong indices. Elsewhere in the European markets, gains in UK's top grocer Tesco on Friday helped mask the effect of declines in couple of heavyweights and resulted into the benchmark FTSE ending marginally higher for the week. Lack of volumes and absence of any significant growth trigger continued to haunt the Indian benchmark as it further edged lower by 1%.

    (Price in US$) 11-Jun-04 18-Jun-04 Change
    Dr.Reddy's 18.9 18.0 -4.8%
    HDFC Bank 29.5 28.4 -3.7%
    ICICI Bank 13.1 12.5 -4.6%
    Infosys 84.5 88.0 4.1%
    MTNL 6.8 6.7 -1.5%
    Rediff 8.6 7.8 -9.3%
    Satyam 18.3 17.6 -3.8%
    Satyam Infoway 6.7 6.2 -7.5%
    VSNL 6.7 6.1 -9.0%
    Wipro 44.3 44.7 0.9%

    Barring a couple of software majors, Indian ADRs experienced weakness on the US bourses during the week. Selling pressure was particularly stronger among dotcom ADRs and ILD major, VSNL, which along with Rediff, lost 9% and emerged as the highest losers. Pharma major Dr Reddy continued to experience decline in its fortunes and lost almost 5% during the week. The stock shed 6% on the Indian bourses presumably on the back of a report that claimed that the size of the US generic markets was largely overstated and due to imminent competition, the margins might also come under pressure. A big negative for companies like Dr Reddy that derives a significant part of its revenues from the US markets. On account of lack of buying opportunity elsewhere, software ADRs continued to remain in the good books of investors and were the lone gainers on the US bourses. Satyam however, bucked the trend and lost nearly 4% over the week.



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