Sensex Opens Flat; Healthcare & Energy Stocks Gain

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Majority of Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.23% while the Hang Seng is up 0.17%. The Nikkei 225 is trading down by 0.22%. Wall Street's major indices extended the New Year rally to close at record levels on Tuesday on investor optimism ahead of quarterly earnings reports and hopes for easing tensions with North Korea.

Back home, India share markets opened the day on a flattish note. The BSE Sensex is trading higher by 23 points while the NSE Nifty is trading higher by 1 point. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.2%.

Sectoral indices have opened the day on a mixed with healthcare stocks and energy stocks witnessing maximum buying interest. While, consumer durables sector and capital goods sector opened the day in red. The rupee is trading at 63.47 to the US$.

Bank stocks have opened the day on a mixed note with Karur Vysya Bank and Dhanlaxmi Bank being the most active stocks in this space. As per an article in a leading financial daily, Axis Bank is looking to acquire a life insurance business. The bank's executive committee had approved the move in the December quarter.

Among possible targets are IDBI Federal Life Insurance and Tata AIA, the reports noted.

With a strong retail franchise and bancassurance experience with partner Max Life Insurance, in which it has a 4.99% stake, Axis Bank is well placed to explore insurance opportunities.

One shall note that, Axis Bank raised about Rs 117 billion from Bain Capital through a sale of shares and warrants in November last year.

Reportedly, Axis Bank's decision was triggered by Max's promoters seeking to exit life insurance through a merger with HDFC Life Insurance, although this move later collapsed. However, after Axis Bank bid for IDBI Federal Life Insurance, preliminary talks did take place with Max.

Axis Bank share price opened the day down by 0.3%.

In another development, the Telecom Commission on Tuesday accepted recommendations by the industry regulator to ease current spectrum holding caps, smoothening the way for consolidation triggered by Reliance Jio Infocomm Ltd's September 2016 launch.

Reportedly, the commission approved raising the overall spectrum cap per operator in a telecom circle, or zone, to 35% from the current limit of 25%.

It suggested scrapping the current intra-band cap on operators that limited them to hold only up to 50% spectrum in a single band in a circle.

Further, the commission also accepted the Telecom Regulatory Authority of India's suggestion to set a cap of 50% on the combined spectrum holding in the sub-l GHz bands (700MHz, 800MHz and 900MHz bands) in a circle.

Under current provisions, an operator can hold up to 25% of the total spectrum assigned across all bands in a circle and 50% of total spectrum within a given band in a circle. The country is divided into 23 telecom circles.

As per the reports, beneficiaries of the move will include Mukesh Ambani's Reliance Jio, Anil Ambani's Reliance Communications Vodafone and Idea Cellular.

Further, the move will let Jio buy Reliance Communications' remaining spectrum in the 850 Mhz band. R-Com has already sold a significant part of its airwaves last month to Jio but needs to sell more to settle its massive Rs 450-billion debt. The increase in overall spectrum cap will facilitate mergers and acquisitions in the sector.

While an increase in spectrum caps is good news, it will also mean that telcos may stay clear of any spectrum auctions in the future, the reports noted.

One shall note that, the whole telecom business has been an underwhelming story so far. While the telecom subscriber base has increased from 300 million in 2008 to 1.2 billion in 2017, investors have little to cheer.

The BSE Sensex has gone up 3.25 times in nine years, but the BSE Telecom Index has not moved an inch from its levels of 2008.

Telecom Sector: A decade of Underperformance

https://www.equitymaster.com/5minWrapUp/charts/index.asp?date=08/16/2017&story=1&title=Telecom-Sector-A-decade-of-Underperformance <>

Telecom companies are straddled with high debt, intense competition, and lack of pricing power. High spectrum costs and regulatory issues have hampered the sector.

While consumers have benefited from low costs and new players fighting for their share, investors have suffered.

Going forward, whether the situation will change in the future will be the key thing to watch out for.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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