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Global markets: Uncertainty looms large

Aug 9, 2003

US markets were a mixed bag this week. While the Dow managed to keep the upward momentum going and rose marginally, the NASDAQ witnessed five consecutive days of distress to end the weak losing around 4%. The week started on a strong note for the Dow. Reports showing signs of strength in factory orders cheered the markets on Monday. Also, economic reports released during the previous week (ended August 1, 2003) further added to the positive sentiments. However, pressure on technology and internet stocks led to the fall on the Nasdaq. On Tuesday, however, both the Dow and the NASDAQ witnessed weakness on account of poor reports on the unemployment front. Reports on monthly job cuts indicated that the numbers were higher by about 43% for the month of July.

Wednesday saw the Dow gain once more. This was supported by gains in auto and financial stocks. Weakness on the NASDAQ was compounded by Cisco’s poor-than-expected results. On Thursday, positive economic reports coupled with dropping yields due to strong demand for the US Treasury bills led to gains on the Dow. Also, weekly unemployment numbers, which were released during the day, were below the benchmark levels and this added to gains on the Dow. This was the third consecutive week when the unemployment numbers closed lower than the benchmark levels. This indicates some signs of improvement in the labor markets, which is a positive for the US economy. A preliminary report on non-farm productivity also reported better than expected growth.

India scores...
Indices 2-Aug-03 9-Aug-03 Change
BSE 3,815 3,884 1.8%
FTSE 4,098 4,148 1.2%
Dow 9,154 9,191 0.4%
Nikkei 9,612 9,328 -3.0%
Hang Seng 10,249 9,945 -3.0%
Dax 3,439 3,332 -3.1%
NASDAQ 1,716 1,644 -4.2%

Over the week, the Sensex was the top gainer. However, the Japanese Nikkei witnessed its biggest slump in almost four months. Decline on the Nikkei was led by pressure on technology stocks. Also, rising prices of fuel had an adverse effect across stock markets in the Asia Pacific region. The biggest loser for the week was NASDAQ, and any sign of improvement on the same is likely to be dependent on the fortunes of the technology sector globally.

While signs of improvement are witnessed in the US and other global markets, the sustainability of this growth is still very unclear. And it will be a few more quarters before some clarity on this account occurs. Investors, thus, need to exercise utmost caution and should not move with the herd, as definite signs of sustainable long-term growth are still unclear.

Tech-pressure continues...
(Price in US $) 2-Aug-03 9-Aug-03 Change
Satyam Infoway 6.0 10.2 70.0%
VSNL 4.9 5.2 6.1%
Dr. Reddy's 22.2 23.0 3.6%
Silverline 1.6 1.6 1.9%
HDFC Bank 22.1 22.5 1.9%
MTNL 5.3 5.3 -0.4%
Infosys 53.8 52.5 -2.4%
Wipro 23.5 22.8 -2.9%
Satyam 10.5 10.2 -2.9%
ICICI Bank 8.4 7.8 -6.6%
Rediff 6.7 5.4 -19.5%

The story for Indian ADRs also moved in line with the fortunes of the US indices. While technology ADRs, Infosys, Wipro, Satyam and Rediff all witnessed downward movement others reflected a mixed picture. Satyam Infoway was the biggest gainer, while Rediff lost the most. After its sponsored issue opening at a premium, Infosys’ ADR witnessed a decline.

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