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Is the rebound for real?

Nov 4, 2000

The week has seen the bourses gaining strength. The BSE sensex was up 5.5%, a gain of 207 points. The Nifty closed 5.4% higher, gaining 87 points. There has been a sudden turnaround in sentiment, as compared to a fortnight back, which wrecked a lot of nerves. The change in sentiment has given impetus for the upward journey of the indices. The turnaround from the gloomy outlook to a more stable one has been driven by several factors. The second week of October was the villain of the piece. During that week the NASDAQ went down 8.4% shedding almost 400 points. Consequently, the Asian markets including India witnessed a selling bout.

As they say when it rains, it pours. The slide in global indices was supplemented by the release of Indian economic data and macro indicators, which did not make a pretty picture. Further, international rating agency, Moody's downgraded the outlook on India's sovereign rating. All these factors weighed down heavily on the market sentiment and made the mood pessimistic, . This was reflected by the Indian benchmark indices losing ground.

However, we have once again overcome pessimism. The markets have rebounded handsomely. The week saw the NASDAQ gain 8% (on the back of strong results from tech companies), which may be the key driver to the turnaround. Further, the Indian markets have factored in the poor economic data.

The current rally was unique in certain ways. The old economy stocks usurped the limelight from the market darling, new economy stocks. The rally was largely led by old economy pivotals. The interest again in golden oldies could be due to market participants rebalancing their portfolio in order to reduce their exposure to the more volatile TMT stocks. They have increased their exposure to old economy stocks in their portfolios.

Cement companies were particularly in the limelight during the latter half of the week. News has flown in that cement prices in the Southern region of the country have firmed up.

Going forward the NASDAQ has closed positive on Friday. Therefore, we do not expect any rude shocks. Also, companies have reported strong quarterly performance and this could positively drive the markets.

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