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Global markets: Up for now, but...

Jul 31, 2004

Major US indices ended a multi-week losing streak and finally managed to carve out some gains. Thus for the week ended July 30th, while the Nasdaq snapped a four-week losing streak and ended 2% higher, Dow edged higher by a similar margin, its first in five weeks. However, for the month of July, Nasdaq shed 8% off its total market cap and Dow declined by 3%. Its one of those times in the US stock markets when good news are being taken in their stride by investors and bad news are being treated as negative. Hence, while some encouraging macroeconomic news like better than expected consumer confidence numbers and home sales figures did little to cheer investors, rising crude prices and worries over slowdown in corporate profits have been keeping the markets on tenterhooks. Although there have been periods of gains such as the ones witnessed in the current week, it is largely a reaction to the markets being oversold than any bet on future growth prospects of US Inc. Therefore, while you might see the markets on an upturn for the next few days, beyond that very few would be willing to take a really bullish call unless of course macroeconomic numbers remain upbeat for quite some time to come and that too on a consistent basis.

Indices 23-Jul-04 30-Jul-04 Change
NASDAQ 1,849 1,887 2.1%
Hang Seng 12,353 12,238 -0.9%
Nikkei 11,187 11,326 1.2%
BSE 5,073 5,170 1.9%
FTSE 4,326 4,413 2.0%
Dow 9,962 10,140 1.8%
Dax 3,797 3,896 2.6%

Taking a leaf out of US books, major European and Asian indices across the world ended the week amidst gains. The only exception was the Hong Kong benchmark, Hang Seng as it edged 1% lower. Most of the other indices gained in the range of 2%-3%. As in US so also in these markets the overall sentiment is fragile with the investors more prone to bad news than good news. Slowdown in US economy, rising crude prices and interest rate hikes have been worrying investors in these markets in no small measure as compared to their US counterparts.

(Price in US$) 23-Jul-04 30-Jul-04 Change
Dr.Reddy's 16.8 16.9 0.6%
ICICI Bank 12.0 13.0 8.3%
Infosys 44.5 50.2 12.8%
MTNL 7.3 6.8 -6.8%
Rediff 5.7 6.7 17.5%
Satyam 18.0 19.6 8.9%
VSNL 7.3 7.9 8.2%
Wipro 15.0 15.5 3.3%

Indian ADRs also reaped the benefit of gains on the US bourses and as a consequence ended mostly higher for the week. Just as there was interest in tech stocks on Nasdaq, Indian tech ADRs also benefited from the trend and emerged as the lead gainers. Witnessing an impressive 13% gain, sector major Infosys emerged as one of the lead gainers. Tech are increasingly being considered as safe havens by investors in these times as they are less prone to factors such as hardening oil prices and interest rate hikes as compared to other sectors. This in part explains the demand for them. Among other ADRs, banking major ICICI Bank and ILD major VSNL also notched up good gains.

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