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Global markets: Its crude prices again…

Sep 25, 2004

For the week ended September 24, while the Fed meeting mostly went along expected lines, it is the rising crude prices and concerns over September quarter earnings that did most of the damage to the indices. As a consequence, both the Dow as well as Nasdaq ended the week with around 2% decline.It wasn’t unusual for the markets to get jittery before the Fed meeting on Tuesday and exactly that happened during the first day of the week. Both the benchmark indices witnessed profit booking and it was particularly intense in case of Dow as profit warnings from behemoths such as Colgate and Unilever further added to the overall mood. However, bulls made their comeback on Tuesday as Fed hiked the interest rates by a quarter of percentage points and investors who were wanting to exercise just that much caution and the dust to settle down, brought into stocks from both the Nasdaq as well as Dow.

From the Fed on Tuesday, the focus shifted to crude prices and it gave little reasons for the markets to cheer. Dow witnessed a heavy sell-off for the next two days on account of oil prices once again threatening to climb record highs on the back of inventory concerns. Nasdaq however was spared the agony on Thursday, as tech sectors are relatively less vulnerable to the menace of crude prices. Just when it was being felt that Dow’s misery would continue to pile on, the indices witnessed modest gains on Friday while Nasdaq ended marginally in the red. Looking at the behaviour of the markets over the week, one tends to get a feeling that while the fundamentals may be more or less intact, it is the bad sentiments that is causing most of the damage.

Indices17-Sep-0424-Sep-04Change
NASDAQ 1,910 1,879 -1.6%
Hang Seng 13,250 13,067 -1.4%
Nikkei 11,082 10,895 -1.7%
BSE 5,561 5,528 -0.6%
FTSE 4,591 4,578 -0.3%
Dow 10,284 10,047 -2.3%
Dax 3,988 3,910 -2.0%

As far as indices across the globe are concerned, a splash of red was evident all across. Barring BSE and UK benchmark FTSE which witnessed marginal losses, all the other indices ended the week with near 2% decline. Despite an end to the month long rally in Europe, analysts out there are hopeful that markets will rebound and the decline is unlikely to extend, as the valuations still look attractive. Similar optimism however was not on view in the Asian markets particularly Japan as fears of slowdown in US consumer spending, Japan’s main export market led to investor concerns.

(Price in US$)17-Sep-0424-Sep-04Change
Dr.Reddy's 17.416.8-3.4%
HDFC Bank29.832.07.4%
ICICI Bank13.513.71.5%
Infosys54.855.61.5%
MTNL6.86.80.0%
Rediff8.07.5-6.3%
Satyam23.622.6-4.2%
Sify5.95.6-5.1%
VSNL7.37.30.0%
Wipro17.817.3-2.8%

Barring banking majors HDFC and ICICI Bank, Indian ADRs witnessed profit booking during the week. Gains in these two could be attributed to similar interest among banking stocks in India. It should be remembered that banking stocks had fallen out of favor with investors owing to expectations of rise in interest rates. However, these concerns now seem to be overplayed and as a consequence interest in bank stocks seems to be reviving. Tech major Infosys was the only other non-banking ADR that witnessed gains during the week.


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