Indian Indices Trade Flat; Realty Sector Down 2.1%

Tue, 16 Jan 11:30 am

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Stock markets in India are presently trading on a flattish note. Sectoral indices are trading on a mixed note with stocks in the realty sector and metal sector witnessing maximum selling pressure. Telecom stocks are witnessing buying interest.

The BSE Sensex is trading up 12 points (up 0.04%) and the NSE Nifty is trading down 6 points (down 0.1%). The BSE Mid Cap index is trading down by 0.9%, while the BSE Small Cap index is trading down by 1.3%. The rupee is trading at 63.74 to the US dollar.

In the news from the telecom sector, as per an article in the Economic Times, a report by CIEL HR Services has stated that the telecom sector will continue to witness decline in headcounts for the next six to nine months. This will take the job losses in the sector from 80,000 to 90,000 during the same period.

The telecom sector, which has been witnessing low profitability and lower margins due to rising competition, has witnessed large lay-offs and has thus made the job scenario uncertain. As per the news, the report is based on a survey among around 100 senior and mid-level employees of 65 telecom companies and software and hardware service providers to telecom companies.

Note that the whole telecom business has been an underwhelming story so far. 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.

Further, with the entry of Reliance Jio, the competition has intensified further. Reliance Jio's low cost offerings and strategy of capturing market share will further dent the sector. The sector has been a classic 'valuet trap'.

While it always looks cheap compared to other sectors, the sector has also failed to provide any reasonable returns. 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. This is evident from the chart below:

Telecom Sector: A Decade of Underperformance

The job losses will further make the situation worse in the near future. For an investor, it's important to differentiate between 'value' and 'value traps'.

As far as job losses are concerned, the above job losses are just a blip in the entire unemployment picture for India. Unless the government takes adequate steps in skilling the youth on a war footing, the demographic dividend can soon turn into a demographic disaster for India.

In the news from commodity space, India's gold imports rose by 71.52% to US$ 3.39 billion in December. This was seen on the back weak global prices and higher domestic demand.

Further, according to the date released by commerce ministry on Monday, silver imports also rose by 106% to US$ 197.26 million last month as against US$ 95.84 million in December 2016.

To keep a tab on the movements in gold and other commodities, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency, and commodity markets.

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

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