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Stock markets: Mixed performance

Nov 2, 2002

Bad news on the economic front failed to dampen investor sentiment and the US markets gained to record a successive fourth week rally. Bad news came in the guise of higher unemployment rate and also lower consumer-spending figures for the month of October. Unemployment rate has gone up to 5.7% in October from 5.6% in September but has been lower than expected figures of 5.8%. Investors were on the other hand were confident of a consumer spending recovery on expectations that the Fed was about to cut interest rates further. This expectation kept the indices buoyant. For the coming week US investors are looking forward to a cut in interest rates from the Fed. Though these are speculations at this stage the possibility of this move is very high. A dip in consumer spending is the main reason for this expectation of a rate cut. Any rate cut is likely to further fuel the rally. Even otherwise the rally may sustain in the coming weeks as it has already weathered bad news on the economic front in the current weak.

(Price in $) 26-Oct-02 2-Nov-02 Change
Satyam Infoway 1.3 1.3 -2.3%
ICICI Bank 5.9 6.0 1.7%
Dr. Reddy's 14.4 14.5 0.3%
Wipro 28.7 28.2 -1.6%
VSNL 4.0 3.8 -5.0%
MTNL 4.0 4.0 -1.3%
Infosys 69.9 70.5 0.8%
Rediff 0.3 0.3 -10.0%
HDFC Bank 13.3 13.4 0.4%
Satyam 9.9 11.1 11.9%
Silverline 0.6 0.7 11.7%

Indian ADRs except for Satyam and Silverline performed poorly on the US bourses during the week. Satyam after losing ground post its results announcement last week has gained handsomely during this week to end it with an 11% gain. Silverline of the other hand has risen inspite of announcing poor September quarter results during the week. Silverline could witness profit booking in the coming week, as fundamentals do not seem to support its current price. Infosys has maintained its ground with out much change compared to the last week. Strong fundamentals are supporting the ADR at its current price inspite of the fact that volatility was observed in this counter in the current week.

Rediff succumbed to profit booking while VSNL has fallen by 5%. Weakness in the VSNL counter has been mainly due to it’s a poor out look on the company vis-à-vis its future revenues. Software ADRs are likely to witness strength in the coming week due to a bullish sentiment in the NASDAQ. Other Indian ADRs are likely to remain subdued on account of a lack of trigger.

Indices 26-Oct-02 2-Nov-02 Change
FTSE 4,051 3,997 -1.3%
Nikkei 8,726 8,686 -0.5%
BSE 2,875 2,948 2.5%
Hang Seng 9,723 9,408 -3.2%
NASDAQ 1,331 1,361 2.2%
Dow 8,444 8,518 0.9%
Dax 3,102 3,165 2.0%

European and US bourses exhibited strength during the current week while eastern bourses like the Nikkei and Hang Seng fell in the same period. BSE on the other hand after witnessing considerable amount of weakness in the early part of the week gained at weekend to close in positive territory compared to last week. Reliance’s find of huge gas reserves in India was the main catalyst for the spurt in the bourses at the weekend. The indices were however subdued on Friday.

In the coming week while an interest rate cut will be a trigger for the US markets other global markets may be subdued for want of a trigger. Indian bourses too may remain weak in the comming week as the earnings season has almost come to an end and investors will start looking for fresh triggers.

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