The Hindu Business Line : 2005 begins on bitter note

THE first week of the year started on a bitter note for both the US and Indian markets, as major indices, which posted a healthy return in 2004, from both these countries witnessed a sharp fall.

Concern over interest rate hikes following revelations from the US Federal Reserve minutes of the December policy-setting meeting, that the Central bank was apparently more concerned about inflation than had previously been known, seemed to have tweaked the market.

The S&P-500 declined 2.1 per cent to 1186.19, Dow Jones Industrial Average lost 1.7 per cent to 10,603.96 and the tech-focussed Nasdaq Composite Index slumped 4 per cent to 2088.61.

Weakness in LME metal prices coupled with S&P's warning on India's widening fiscal deficit triggered a collapse in the domestic equity markets; the BSE Sensex crashed 2.76 per cent at 6420.46 and the NSE' S&P CNX Nifty tumbled 3.12 per cent.

The double whammy effect had its impact on the Indian ADRs too. Except VSNL, all the other counters crashed by over 5 per cent.

Wipro was the worst hit by tumbling 12.7 per cent at $21.52 against the previous week close of $24.65. While Infosys declined 5 per cent to $65.93 ($69.31), Satyam Computer fell 8 per cent to $22.16 ($24.13).

The US Fed policymakers comment that rates are too low "to keep inflation stable" and rising prices may become a risk to growth sparked concern that slower growth and higher borrowing costs in the US may slow down demand for goods sold by exporters. This apprehension seemed to have affected the Indian IT majors.

Another biggest loser was HDFC Bank, tumbling close to 10 per cent at $40.91 ($45.36); ICICI Bank also fell 8 per cent to $18.6 ($20.15), but before that it peaked to a 52-week high at $20.6 during intra-week.

HDFC Bank on Saturday announced its Q3 results; the bank's net profit climbed 31 per cent to Rs 170.93 crore against Rs 130.36 crore in the year ago period.

Tata Motors, which announced its plans to merge with Tata Finance also finished lower at $11.3 ($11.92).

Amidst all, VSNL, the lone gainer, inched up to $10.49 ($10.28).

On the premium front too, Indian ADRs suffered with almost all the counters seeing a decline in their premium with respect to their respective underlying equities.

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2005 begins on bitter note