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Global markets: Volatile week - Views on News from Equitymaster
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  • Dec 21, 2002

    Global markets: Volatile week

    It was a volatile week for the US markets. Selling was the broad theme for the week. However, the Dow and NASDAQ recovered at the end of the week. Except for Monday and Friday the US markets were under a bear grip. On Monday, US markets showed signs of recovery after a poor performance last week. But Tuesday onwards the markets weakened as the Iraq issue started gaining more prominence. Investors seemed wary as the probability of war started looking more realistic. Yesterday however markets recovered, as holiday cheer deafened the war noises.

    On the economic front, there was a dearth of news during the week. The complete analysis of the third quarter GDP growth indicates a 4% growth in line with earlier expectations. Apart from this, blue chip McDonalds warned of a first time ever loss in its quarterly performance. Oracle, on the other hand, beat analyst expectations by posting better than expected second quarter results this week. Both corporate and economic news are not pointing to a fast US economic recovery. Post holidays markets will face the yearly earnings season. US investors seem to have factored in the expected poor performance of corporate USA and may look to economic numbers to spur further investments.

    Indices 14-Dec-02 21-Dec-02 Change
    FTSE 3,878 3,890 0.3%
    Nikkei 8,516 8,407 -1.3%
    BSE 3,344 3,337 -0.2%
    Hang Seng 9,728 9,629 -1.0%
    NASDAQ 1,362 1,363 0.0%
    Dow 8,434 8,511 0.9%
    Dax 3,077 3,024 -1.7%

    Global market remained weak with the German market Dax falling by nearly 2%. Fears over a short-term war with Iraq have increased to an extent, and this is creating nervousness among investors. Investors seem to be shifting loyalties to the all time bell weather -- gold -- to revive their fortunes. Fears of a war have also led to a strong demand for crude thus inflating crude prices further.

    (Price in US $) 14-Dec-02 21-Dec-02 Change
    Satyam Infoway 2.5 2.5 0.0%
    ICICI Bank 7.0 6.7 -4.3%
    Dr. Reddy's 16.6 18.8 13.1%
    Wipro 33.4 33.2 -0.6%
    VSNL 4.3 4.3 -0.7%
    MTNL 4.4 4.4 -0.7%
    Infosys 68.8 74.1 7.7%
    Rediff 0.6 0.6 16.4%
    HDFC Bank 12.7 13.8 8.3%
    Satyam 13.0 13.1 0.8%
    Silverline 1.2 1.0 -15.5%

    Except for Dr. Reddy’s and HDFC Bank the performance of Indian ADRs was either poor or lacklustre. Dr. Reddy’s gained significantly as a district court in New Jersey dismissed Pfizer's petition against Dr. Reddy’s regarding the patent term extension of its blockbuster drug Norvasc on Tuesday. Dr. Reddy’s will now be able to sell this generic drug in the US markets by August 2003. This drug had a market of US$ 2.1 bn in 2001.

    Among the other major gainers, HDFC Bank spurred by nearly 8%. Software ADRs have been range bound in the current week. Infosys on the other hand, has been recovering from lower levels. The ADRs had witnessed correction after the company had announced issuance of more ADRs for the international markets. The range bound nature of Indian ADRs may continue, as there are no clear triggers for the US as well as the Indian markets.

    This week Indian bourses saw the JPC report on the stock market scam in 2001 being tabled in the parliament. This created a bit of investor apprehension. Polaris’ chief was arrested then released from an Indonesian prison, while HCL Technologies bought out the software services business of HCL Infosystems. Software stocks may witness weakness on the Indian markets due to lack of news flow regarding large outsourcing contracts. Global markets may continue to remain range bound due to the holiday season, as investors may not want to take new positions before the New Year. Lack of positive triggers are likely to keep investors away from Indian markets.



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