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Telecom Stocks Out of Favor
Thu, 28 Jan 01:30 pm

After opening the day on a flattish note, the Indian indices continued to trade near the dotted line during the post noon trading session. Sectoral indices are trading mixed with stocks from the telecom and capital goods sectors leading the losses.

The BSE Sensex is trading lower by 12 points (0.1%) and the NSE Nifty is trading down by 2 points (0.03%). The BSE Mid Cap index is trading down by 0.1% while the BSE Small Cap is trading up by 0.1%. Gold prices, per 10 grams, are trading at Rs 26,758 levels. Silver price, per kilogram, is trading at Rs 35,177 levels. Crude oil is trading at Rs 2,192 per barrel. The rupee is trading at 68.05 to the US$.

Aluminum stocks are trading on a mixed note with Hindalco bearing most of the brunt. As per an article in Economic Times, aluminum consumption in India is slowly picking up. The pick-up is seen in the backdrop of an increase in GDP to 7.3% to 7.5% in the current fiscal. Further, growth in electrical and electronics sectors, construction, transport and automobiles are likely to trigger higher consumption in the coming days.

What remains a major concern for the industry is the rise in imports. The rise is seen on the back of excess global aluminum production which has out-passed consumption by 2.6%. This rising production has led to a surplus of roughly 1.4 million tonne (MT) in 2015.

Most of this glut was driven by the slowdown in China, which resulted in dumping of surplus production of that country in international market. During 2014-15, volume of aluminum imports in India crossed 1.6 MT and is on the rise. Aluminum import constitutes 56% of total domestic consumption of metal, leaving only 44% of the market to domestic producers.

For India, the average per capita consumption is recorded at 2.2 kg. This is as against a global average per capita of 8 kg. By looking at the difference, there remains a huge potential for aluminum consumption in India.

Stocks in the telecom space are trading on a negative note with ADC India Communications and AGC Networks leading the losses. In another news, Bharti Airtel is close to buying 4G airwaves from Aircel for about Rs 38 billion. This comes as the company is looking to strengthen its high-speed broadband spectrum holdings ahead of an expected battle over data services with Reliance Jio Infocomm.

The deal is for buying Aircel's 4G spectrum in the 2300 MHz frequency band in eight circles. The same is expected to be finalised by March 2016 and will extend Bharti Airtel's 4G footprint across bands to 18 circles from the present count of 15.

One should note that Bharti Airtel was the first to start 4G services, mostly on 2300 MHz band, in 2012. The company has stepped up the rollout in the last few months, expanding to more than 350 cities and towns, anticipating stiff competition from Jio, which is expected to start commercial operations in April.

The above deal with Aircel will probably reap benefits for Airtel and aid in its efforts of setting up competitive technology platforms across India. Presently the stock of Bharti Airtel is trading lower by 1.6%.

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