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Nasdaq's influence on BSE to weaken further

NetScribes/Rakesh Kedia

So what if the US election results are mimicking India's, Nasdaq's influence on the Indian stock markets is on the decline.

The reason: Indian software stocks are projected to turn in impressive results over the next few quarters, which in turn would drive the Sensex. In fact, there is a strong view emerging in the market that the BSE Sensex would sever its unnatural bond with the US bourse over this year-end.

"The correlation between the Nasdaq and Indian software stocks has been diminishing. As we go forward, this will get diluted further. Indian software services companies will continue to do well and this will drive their scrips on the BSE more than what happens at Nasdaq," Brian Brown, managing director and head of equities, Salomon Smith Barney, the investment banking arm of Citigroup, told NetScribes.

Even Morgan Stanley Dean Witter (MSDW) agrees. A recent report by the Singapore-based India strategy group of MSDW says that the "relative insulation" Indian players enjoy against their US counterparts can set them apart on the earnings front. "With managements expressing confidence about the next few quarters (in terms of aggressive manpower hiring), the sector is poised for growth," states the report.

Contrast this with the bad news streaming out of Nasdaq. Online auctioneer eBay.com is retrenching people, toy retailer eToys.com has been downgraded by analysts and as for the market heavyweight Amazon.com, US market regulator Securities and Exchange Commission (SEC) is inquiring into its deals with retailers.

The bad news is not limited to e-tailers. Analysts have expressed concerns over the possible future growth rates for Cisco, now a giant amongst giants. Intel too has reported earnings that were below consensus estimates. And these are stocks that weigh heavily on the Nasdaq Composite.

"A rise of 500 points in the Sensex has taken place irrespective of the behaviour of the Nasdaq, which is an indication of the reducing correlation. This diminishing correlation will also help traders to take an independent view of the markets and not worry about what happens at the Nasdaq," says Amit Bagri, director of Oasis Securities, a member of the National Stock Exchange.

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