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Stock markets: Sign of things to come?

Oct 19, 2002

It has been an eventful week at the US markets with the Dow gaining by nearly 800 points in the last five trading sessions. Perception that the markets have bottomed out and lack of bad news on the economic front seem to have led to this rally. During the week positive results announced by Microsoft, General Motors and IBM kept investor sentiment buoyant. However, profit warnings from chipmaker Intel and beverage major Coca Cola led to the fall on Wednesday. With no major results announcements yesterday investors took the opportunity to consolidate their portfolio and strategize for the coming week, hence the marginal movement on the bourses yesterday. The rally witnessed on Wall Street seems more of a technical correction than a fundamental one. Apart from a dip on the bourses on Wednesday the rally has sustained. No major companies are expected to announce their results in the coming week and this will give investors time to evaluate their positions. The coming week could see sideways movement of the markets, as investors would be looking to consolidate their position on the bourses.

(Price in $) 12-Oct-02 19-Oct-02 Change
Satyam Infoway 1.1 1.3 14.0%
ICICI Bank 5.8 5.9 1.7%
Dr. Reddy's 17.5 15 -14.2%
Wipro 30.5 31.1 2.0%
VSNL 4.5 4.2 -6.9%
MTNL 4.7 4.2 -11.2%
Infosys 64.8 71.7 10.7%
Rediff 0.4 0.4 2.6%
HDFC Bank 14.1 13.3 -5.7%
Satyam 9.3 10.3 10.9%
Silverline 0.7 0.7 0.0%

Indian ADRs saw a mixed performance in the last week. Infosys was able to stretch its gains in to the second week on the back of better than expected results announcement. Wipro that had gained during the beginning of the week has lost ground on Friday post results announcement but still managed to close in the positive zone.

Wipro reported a 13% growth while its net profits declined by 3% on a consolidated YoY basis. For its software services business the company reported a 1% fall in its blended billing rates, which has led to a 100 basis points drop in operating margins sequentially. While the performance of Wipro has been on expected lines but compared with Infosys the results seem a bit lacklustre. Satyam on the other hand has been rising consistently on the NASDAQ on expectations of a good performance in the September quarter. The major losers were Dr Reddy’s (14%) and MTNL (11%). MTNL lost ground as reports of a possible take over by BSNL came to the fore.

Indices 12-Oct-02 19-Oct-02 Change
FTSE 3,953 4,131 4.5%
Nikkei 8,530 9,086 6.5%
BSE 2,996 3,010 0.5%
Hang Seng 8,966 9,613 7.2%
NASDAQ 1,210 1,288 6.4%
Dow 7,850 8,322 6.0%
Dax 2,931 3,164 7.9%

Positive sentiments on the US markets were well reflected on the European and Asian markets except the Indian bourses. The Indian markets remained lacklustre during the week, as there were no apparent triggers. Positive news on the earnings of software companies have already been factored and investors seem to be waiting for more good news on the earnings front. In the coming week global markets could witness some volatility on account of new geopolitical concerns. Bombings in Indonesia and Philippines has increased investor nervousness and this may be reflected on the bourses in the coming weeks.

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