• JANUARY 19, 2002

Calling 'ice man'

The start of last week is likely to have led to an adrenalin rush for domestic investors. The Pakistani chieftain declaring intentions to crack down on fundamentalist groups and putting out a hand of friendship, excited investors over the weekend. However, bourses were marred with volatility and closed marginally higher for the week.

The results season, insofar, has met with expectations. Most of the announcements were from the tech sector, which traditionally is the first to announce results. However, the rush to be first, which was the case twelve months back, seems to be a thing of the past. Although third quarter results have met or beaten expectations, guidance by pivotals has not been encouraging. The ramifications of September 11 events, which were expected to be felt in 3Q, seem to be reflecting more in the last quarter. This could be due to companies executing orders post September 11 in 4QFY02. Auto companies, which experienced a slump last year have come back sharply with revival in demand. The auto sector is considered to be a lead indicator of an economic turnaround, which could support investor expectations. Also, the turnaround in demand has resulted in a favourable YoY effect.

Having said that, the guidance seems to be in line with global trends. While results, citrus paribus, could have triggered a more bullish sentiment, optimism was dampened with U.S markets sliding this week. Global tech heavyweights Microsoft, IBM and Intel have all announced a weakening business outlook for the ongoing quarter. Markets, towards the end of 2001, climbed higher on the expectations of a sure shot recovery in the second half of 2002. However, these expectations are being challenged with many questioning the timing and slope of the upturn.

Recovery in the domestic economy seems to be unfolding. As mentioned earlier, auto companies are experiencing improved demand. For November '01, although a trend is not established, core sector growth was higher compared to the preceding month. GDP growth estimates, QoQ, have exhibited a revival, driven largely by an improved performance in services and agriculture sector. These indicators, nonetheless, only support the market rise seen over the past two months.

The Sensex is experiencing resistance at 3,400 levels, which is leading to a flattish trend. Over the next two weeks markets will enter peak of the results season, which is likely to offer direction. However, the U.S earnings (warning) season could be a wet blanket, which seems to suggest persisting volatility, as no dominant trend is established.

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