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Immunity amidst concerns - Views on News from Equitymaster
 
 
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  • Aug 17, 2002

    Immunity amidst concerns

    After having gained nearly 5% in the previous week, the US markets took a breather this week. While the Dow ended flat, the NASDAQ continued to move higher. But for the year, the Dow is down 12.4%, the NASDAQ down 30.2% and the S&P 500 has lost 19.1%.

    Economic data ruled the trend in blue-chip stocks, which ended lower. Consumer sentiment index fell to 87.9 in early August, compared with 88.1 in July. The business condition (activity) index also dropped to negative 3.1 in August from positive 6.6 in previous month, its first negative reading this year. A reading below zero indicates contraction in business sentiment. During the week, The Federal Reserve left the interest rates unchanged at 40 year lows. The central bank however, pointed towards weak economic conditions, dampening investor confidence.

    The NASDAQ was driven by Dell Computers, the No. 2 PC maker, which reported higher second quarter earnings, as against loss in the comparable quarter in the previous year. The company also raised its sales expectations for the current quarter and indicated that it will continue to steal market share from competitors. Upbeat forecast from Dell boosted the beleaguered tech sector.

    Tech stocks rebounds
    (Price in $) 10-Aug-02 17-Aug-02 Change
    Silverline 0.9 1.1 27.1%
    ICICI Bank 5.6 6.0 7.9%
    Satyam 8.8 9.4 6.1%
    Satyam Infoway 0.6 0.6 5.3%
    MTNL 5.3 5.5 4.8%
    Infosys 52.2 53.7 2.9%
    VSNL 5.0 5.1 1.4%
    Dr. Reddy's 18.0 18.0 0.1%
    HDFC Bank 14.2 14.1 -1.0%
    Wipro 24.9 24.0 -3.7%
    Rediff 0.4 0.3 -19.3%

    Satyam group companies were in limelight this week. Silverline too soared by over 27%, recouping most of its losses recorded in the previous fortnight. The stock could be attracting buying interest on account of its lower valuations. The company’s book value (as reported) is over US$ 2, while the stock is trading near US$ 1. However, the book value could be higher as the company provides lower depreciation.

    Infosys was up by 3%. The company has been assessed at the Level 5 on the PCMM model by KPMG Consulting, becoming the first company in the world to be assessed at the optimizing level on the updated version of the model. The model helps software companies increase their ability to attract, develop, motivate, organise and retain the talent needed to continuously improve their software development capabilities. Meanwhile, Infy indicated pricing pressure in its key market, the US. It however expects to meet its revenue forecast for the current fiscal.

    Wipro lost steam after the company announced restatement of its first quarter profits. Wider losses at its medical equipment joint venture, Wipro GE Medical Systems, has resulted in lowering of its quarterly net profits to Rs 1.4 bn from Rs 1.6 bn reported earlier (loss of Rs 186 m from this joint venture).

    NASDAQ regains glory
    Indices 10-Aug-02 17-Aug-02 Change
    NASDAQ 1,306 1,361 4.2%
    BSE 2,976 3,066 3.0%
    Hang Sang 10,014 10,265 2.5%
    Dow 8,745 8,778 0.4%
    FTSE 4,322 4,330 0.2%
    Dax 3,761 3,685 -2.0%
    Nikkei 10,000 9,788 -2.1%

    The US markets climbed higher for the second consecutive week. The markets seem to be getting immune from flurry of news including bankruptcy filings, accounting inaccuracies and mixed corporate business outlook. However, selling pressure at higher levels cannot be overruled considering the prevailing weakness in the economy.

     

     

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