Sensex Opens Marginally Higher; Telecom Stocks Gain

Wed, 1 Jul 09:30 am

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Asian stock markets are trading mixed. Shares in China are higher today as the Shanghai Composite gained 0.7%. Nikkei 225 is trading down by 0.4% while, Hang Seng is trading up by 0.5%.

Meanwhile, the S&P 500 rallied on Tuesday to finish higher and secure its biggest quarterly percentage gain in more than two decades as improving economic data bolstered investor beliefs that a stimulus-backed rebound for the US economy was on the horizon.

Back home, Indian share markets opened on a positive note.

The BSE Sensex is trading up by 180 points. The NSE Nifty is trading up by 78 points.

Meanwhile, the BSE Mid Cap index has opened down by 0.3%.

BSE Small Cap index is trading higher by 0.1%.

Sectoral indices are trading mixed with BSE Telecom witnessing maximum buying interest.

BSE Power Index is under maximum selling pressure, trading down by 1.2%.

Moving on, the rupee is currently trading at 75.50 against the US$.

Gold prices are currently trading up by 0.1% at Rs 48,795.

Moving on to the stock specific news...

Telecom stocks are the top buzzing stocks today.

As per an article in a leading financial daily, US-based Carlyle Group will invest US$235 million in Bharti Airtel's data centre business, Nxtra Data.

Reportedly, Carlyle will hold an approximately 25% stake in the business on completion of the transaction, with Airtel continuing to hold the remaining stake of approximately 75%.

Nxtra will use the proceeds from deal to continue to scale up its infrastructure and offerings across the country.

The transaction, subject to regulatory approvals including the Competition Commission of India, values the Nxtra enterprise at approximately US$1.2 billion.

Bharti Airtel share price opened the day up by 1.1%.

Meanwhile, Vodafone Idea's shares are also in focus after the company pre-tax loss rose 73% YoY to Rs 117.4 billion in the March quarter of FY20 owing to exceptional expenses.

While the firm's revenue remained flat on a year-on-year basis, the loss widened due to Rs 61.4 billion worth of exceptional items, which included costs related to merger and integration, additional provisioning for depreciation and impairment, and one-time spectrum charges.

Moving on to the news from the economy. Fitch Ratings on Tuesday cut India's growth forecast for 2021-22 fiscal to 8% from 9.5% projected last month.

It, however, retained its projection of Indian economy contracting by 5% in the current fiscal.

Indian economic growth stood at an estimated 4.2% in FY20.

In its June update of Global Economic Outlook, Fitch projected Indian economy to grow 5.5% in FY23.

Note that, S&P has forecast a 5% contraction in the fiscal year starting April, and the growth to recover to 8.5% next fiscal.

Moody's expects India's real GDP to contract by 4% in fiscal 2020 due to the shock from the coronavirus pandemic and related lockdown measures, followed by 8.7% growth in fiscal 2021 and closer to 6% thereafter.

Speaking of the coronavirus impact on Indian economy, note that the Indian economy was grappling with its own issues and Covid-19 has made matters worse.

The industry was facing demand problems, due to which business houses were reluctant to undertake capex plans. Unemployment was at its peak and exports were consistently down for several months.

India's GDP growth has been on a consistent decline after peaking out at 7.9% in Q4 of FY18 to 4.7% in Q3 of FY20, as can be seen in the chart below:

Declining GDP Growth for India

Interestingly, there's a silver lining in all this. India can become an outsourcing hub. The global slowdown will mean that countries like the US, will be looking out for low-cost outsourcing destinations like India.

Further, a lot of global buyers have already shifted to India to source ceramics, home appliances, fashion, and lifestyle goods.

Meanwhile, as per the reports, around a thousand foreign manufacturers want to relocate their production to India, a country they see as an alternative to China.

Here's an excerpt from one of the articles Tanushree Banerjee wrote on the Indian economic recovery:

• It's also a fact that India's importance in the global supply chain has never looked better. PM Modi himself referred to that.
  
  Therefore, utilising the stimulus package to tighten India's presence in the global supply chain will be the fastest way to move up the Swoosh index. Any delay or disregard would cost India dearly.
  
  True that Apple, Samsung and several smartphone manufacturers are already considering an expansion of their Indian capacities.
  
  But the land, labour, liquidity, and legal reforms cannot remain on paper if the Make in India dreams are to be realised.
  
  I expect to gather more cues about India's prospects on the Swoosh index over coming months.

Watch this space as Tanushree tracks these Rebirth of India megatrends closely.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

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