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Global markets: Oil down, indices up…

Oct 30, 2004

Crude prices, the nemesis of the world economic growth in recent times, fell by around 8% during the week and quite understandably the US indices rejoiced and witnessed robust gains during the week. Both the Dow as well as Nasdaq edged higher by 3%.Although the week started off with no further escalation in crude prices, there were other events such as a plunging dollar and uncertainty surrounding next week’s presidential elections that kept the investors on tenterhooks and resulted into a largely lackluster trading on Monday. The next two days however were marked with robust gains. Insurance stocks that were hammered in the previous weeks on account of allegations of customer cheating came back into the reckoning on Tuesday as investors took comfort in some favorable news. The rally that ensued spread over to other sectors as well and resulted into broad based gains for the market.

Bulls continued to strut their stuff on Wednesday, as crude prices, the nemesis of stock markets in recent times eased by over 5% on the back of strong weekly inventory. The news once again resulted into a broad based rally as investors suddenly became optimistic about economic growth. Although crude prices continued to ease for the next two days as well, news of China raising its interest rates and uncertainty ahead of next week’s presidential elections capped the gains and the indices failed to budge much from the levels reached during mid-week.

NASDAQ 1,915 1,975 3.1%
Hang Seng 13,015 13,055 0.3%
Nikkei 10,857 10,771 -0.8%
BSE 5,641 5,676 0.6%
FTSE 4,615 4,624 0.2%
Dow 9,758 10,027 2.8%
Dax 3,935 3,960 0.6%

Major indices across Europe and Asia however could not replicate the gains notched up by their American counterparts and most of them ended the week amidst marginal gains. As far as the European indices are concerned, falling crude prices and strength in insurance sector did result into a mid-week rally but the decline at the start of the week and concerns over Chinese economic growth stalled any further gains. Elsewhere in Asia, pressure among steel stocks on Nikkei, the Japanese benchmark, following China interest rate hikes did result into the sector stocks falling out of favor but falling crude prices and strength in the US markets helped cap the decline.

(Price in US$)22-Oct-0429-Oct-04Change
Dr.Reddy's 16.616.60.0%
HDFC Bank32.235.29.3%
ICICI Bank14.715.87.5%
Tata Motors9.29.31.1%

Among Indian ADRs, buoyancy was witnessed all across the board with the exception to tech major Wipro and pharma major Dr Reddy, as they ended unchanged for the week. With gains of 9% however, private banking major HDFC Bank and dotcom major Rediff emerged as the highest gainers. Gains in the former could be the result of robust 2QFY05 performance posted by it. Strong growth in the company's assets continued to be the main driver. The bank continued to keep its interest costs low and this has significantly helped the growth in net interest income. Strong 8% growth in another banking major ICICI bank was another highlight of the week for Indian ADRs.

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