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Stock markeets: Cautious optimism - Views on News from Equitymaster
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  • Oct 26, 2002

    Stock markeets: Cautious optimism

    US markets have extended their gains in the to the third week. During the last week NASDAQ has been the better performer. There has been considerable positive activity during the weekend, which has helped the NASDAQ. Higher earnings estimates by major brokerages on tech stocks have buoyed these counters. Bullishness on the NASDAQ was mirrored to a certain extent on the Dow.

    Thought the rally has prevailed over the last three weeks it still seems a technical correction. Any disappointment on the economic front may see a reversal in the rally. With two major economic reports slated to release late next week caution could prevail on the bourses. Employment report and the Institute for Supply Management's report are the two reports that are going to be released on Friday next week. Economic indicators don’t seem to paint a bright picture. Consumer spending which was to a large extent fuelled by the boom in auto sales seems to have petered out. With consumer spending contributing nearly two thirds of the US economy, any sluggishness in the same may negatively impact investor sentiment. The coming week may be crucial as investor reaction to negative economic news will be apparent. The markets could witness a new direction in the coming weeks.

    (Price in $) 19-Oct-02 26-Oct-02 Change
    Satyam Infoway 1.3 1.3 0.0%
    ICICI Bank 5.9 5.9 0.0%
    Dr. Reddy's 15.0 14.4 -4.0%
    Wipro 31.1 28.7 -7.7%
    VSNL 4.2 4.0 -4.8%
    MTNL 4.2 4 -4.8%
    Infosys 71.7 69.9 -2.5%
    Rediff 0.4 0.3 -25.0%
    HDFC Bank 13.3 13.3 0.0%
    Satyam 10.3 9.9 -3.9%
    Silverline 0.7 0.6 -14.3%

    Indian ADRs fared poorly on the US bourses during the week. Wipro, VSNL and MTNL being the major losers. Poor results were the major reason for fall in VSNL and MTNL prices. Concerns over the proposed merger of MTNL with BSNL have further taken a toll on MTNL prices. Dr Reddy’s lost during the week post its quarterly result announcement. The company has reported a 15% fall in topline while its bottomline has fallen considerably by 31% on a YoY basis. The company reported lower sales of its generic offering Fluoxitine, as it lost its exclusivity in the US market.

    In the coming week Indian ADRs may look for direction from the US bourses. Last week software companies declared quarterly results, which impacted ADR prices. Further weakness may be observed in software ADRs unless there is positive movement on the US bourses.

    Indices 19-Oct-02 26-Oct-02 Change
    FTSE 4,131 4,051 -1.9%
    Nikkei 9,086 8,726 -4.0%
    BSE 3,010 2,875 -4.5%
    Hang Seng 9,613 9,723 1.1%
    NASDAQ 1,331 1,331 0.0%
    Dow 8,444 8,444 0.0%
    Dax 3,164 3,102 -2.0%

    Global markets witnessed weakness over the week. Indian bourses also exhibited weakness as heavyweights like HLL and RIL fell considerably. Lack of a trigger may see Indian bourses falling further in the coming week. Global bourses on the other hand may look for direction from the US markets. All in all an uncertain week ahead.



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