Tech tremors yet to subside

With another fall forecast, the market is expected to trade cautiously in the coming week. Factors like quarterly results, FII flows and international oil prices will continue to determine the trend of the market.

On Friday, the blue-chip Dow Jones Average had its biggest one-day drop since May 2003, falling 191 points. The profit decline in IBM and other tech companies are expected to add to the selling pressure.

Foreign funds are unlikely to put in big money in the Indian equities in the short-term. “Foreign fund flows are likely to remain erratic in the coming days in absence of fresh triggers for FIIs to put money in the emerging markets,” said a fund manager.

In fact, FII inflows in emerging markets have slowed down recently following expectations that a further increase in US interest rates may be forthcoming as well as due to the strengthening US dollar.

The market has ignored the recent trend of fall in the international oil prices.

After disappointment from Infosys Technologies, the earnings of other leading companies would be keenly watched in the coming days. Any more below-expectations earnings announcements from a leading company may result in further fall on the bourses.

Among companies announcing their fourth quarterly results next few days are: Satyam Computer, Tata Consultancy Services, Wipro, Ranbaxy Laboratories, Gujarat Ambuja Cements, and National Aluminium Company.

Fine print of the market crash

If investors are running away from the market they’re missing two vital points. One, that this 3.4 per cent single-day fall is the 27th largest fall in five years, and way too far from the 11.1 per cent fall on May 17, 2004. They are forgetting that the 219.58-point Friday fall does not carry the same meaning as the March 13, 2002 fall of 227.24 points when the Sensex stood at 3,540.65 and meant a loss of 6 per cent.

Finally, even after this fall, the Sensex is up 7 per cent over the past year, has doubled since April 2003, given a compounded annual return of 21.8 per cent since 2002, 17.7 per cent since 2001 and 13.5 per cent over the past five years – at its worst, it has given a return higher than any fixed deposit.