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Stock Markets: Global gloom - Views on News from Equitymaster
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  • Oct 5, 2002

    Stock Markets: Global gloom

    US markets have fallen for the sixth consecutive week. Dow has fallen 2% while the NASDAQ has fallen 5% to their lowest levels in five and six years respectively. There seems to be no dearth of bad news, especially from the corporate earnings front. Pharma companies like Schering-Plough have issued fresh earnings warnings. Even Blue chip Boeing disappointed investors with a bleak third quarter earnings outlook. In addition, credit rating agency Standard & Poor's downgraded its long-term corporate credit rating on Walt Disney leading to further gloom. Weakness in chip stocks and EMC's warning on third quarter results were the main reasons for fall in the NASDAQ.

    Even Good news was misleading to a certain extent. While the unemployment rate has been lower than expected the actual numbers indicate 43,000 job cuts in September compared to a net gain in the previous month. The only good news that was reported was that the US services sector, which forms a major part of the economy witnessed improvement. A survey report by an independent agency cited that the index of service sector activity actually rose in the month of September. However even this failed to perk up investor sentiment.

    (Price in US $) 28-Sep-02 5-Oct-02 Change
    Satyam Infoway 1.1 1.6 48.1%
    ICICI Bank 5.9 6.2 4.2%
    Dr. Reddy's 17.0 16.6 -2.1%
    Wipro 27.4 27.0 -1.4%
    VSNL 4.6 4.5 -2.8%
    MTNL 4.6 4.5 -2.0%
    Infosys 55.0 53.4 -3.0%
    Rediff 0.4 0.4 2.6%
    HDFC Bank 14.2 13.8 -2.8%
    Satyam 9.1 8.9 -2.1%
    Silverline 0.7 0.7 1.5%

    Indian ADRs with an exception of a few did not perform well either. Satyam, ICICI bank, Rediff and Silveline were the only gainers during the week.

    Satyam finalized the sale of stake in its loss making subsidiary Sify to an investment fund, Softbank Asia Infrastructure Fund Investor. Softbank, Cisco and British Portfolio Investor Venturetech Solutions Pvt Limited are the promoters of this investment fund. Sify has the second largest number of Internet subscribers in the country after VSNL and also has a significant presence in the Internet based corporate connectivity services. The stake sale is expected fetch Satyam US $ 20 m (Rs 980 m). Satyamís stake in Sify will come down to 35% from the existing 53% post the stake sale. Sify had already gained nearly 48% during the week on expectations of such a move. Satyam however lost 2% during the week.

    The other major gainer was ICICI bank, which gained marginally by 4%. The momentum generated by the stake sale to strategic investors seems to have spilled over in to the second week also. Tech counters with the exception of Silveline and Rediff have recorded a weekly fall mirroring the gloom prevalent on the NASDAQ.

    Indices 28-Sep-02 5-Oct-02 Change
    FTSE 3,907 3,814 -2.4%
    Nikkei 9,530 9,028 -5.3%
    BSE 3,037 2,929 -3.6%
    Hang Seng 9,294 9,051 -2.6%
    NASDAQ 1,199 1,140 -4.9%
    Dow 7,701 7,528 -2.2%
    Dax 2,919 2,715 -7.0%

    Global markets too seem to be mirroring the gloom on the US bourses. All the major indices have fallen by 4% on an average during the week. The BSE after a respite in the last week has fallen at the close of this week. US markets are unlikely to show strength in the coming week. US presidentís address to the nation on the Iraq issue and uncertainty over corporate earnings is likely to weigh heavily on investors minds. All in all it could be a bumpy week ahead.



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