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Indian Indices Trade Marginally Lower; Metal Sector Down 2.7%
Wed, 18 Jul 12:30 pm

Share markets in India are presently trading marginally lower. Sectoral indices are trading on a negative note with stocks in the metal sector and telecom sector witnessing maximum selling pressure.

The BSE Sensex is trading down by 118 points (down 0.3%), while the NSE Nifty is trading down by 25 points (down 0.2%). The BSE Mid Cap index is trading down by 1.2%, while the BSE Small Cap index is trading down by 0.8%.

The rupee is trading at 68.53 to the US$.

In the news from the telecom sector, Idea Cellular share price is in focus today. Shares of the company are witnessing selling pressure as the Department of Telecommunications (DoT) rejected the company's plea to along with that of Vodafone India to revisit their dues.

The development follows DoT's demand for Rs 72.6 billion upfront payment as dues by Idea Cellular and Vodafone. The sum is split between a bank guarantee of Rs 33 billion on account of one-time spectrum charges claimed from Idea, and cash payment of Rs 39 billion towards market price for non-auctioned airwaves held by Vodafone India.

The DoT has said its numbers are fine and both the companies should pay up the mentioned amount to get a final seal of approval on their merger at the earliest.

Last week, telecom Minister Manoj Sinha said that the government has approved the Idea Cellular and Vodafone India merger.

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Both Idea and Vodafone were expecting the merger deal to create India's largest telecom company to be completed by June 30, 2018. However, the process was stalled due to regulatory approvals.

Notably, Vodafone India and Idea Cellular merger is set to create India's largest telecom operator, surpassing Bharti Airtel Ltd. The top operator will have a revenue market share of around 37% and over 433 million subscribers.

The two companies were set to start operating as one entity from July 1 and for that to happen, the merger proceedings must be completed this month. Idea has called an extraordinary general meeting on June 26 to consider the proposals, including changing the name of the merged entity and raising funds of Rs 150 billion through debentures.

It will be interesting to track the progress of the new telecom leader, and whether it can sustain the pole position, in the hyper-competitive telecom industry.

Speaking of telecom sector, 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 from its levels of 2008, as can be seen from the chart below:

Telecom Sector: A Decade of Underperformance

Here's what we wrote about the struggling telecom sector in one of our issues of The 5 Minute WrapUp:

  • 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.

    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, it has failed to provide any reasonable returns. We also believe the situation is unlikely to change in the near future. For an investor, it's important to differentiate between 'value' and 'value traps'.

In the news from initial public offering (IPO) space, the IPO of TCNS Clothing is set to kick off today. The issue comprises of 15,714,038 shares which will be offered in the Rs 714-716 price band.

The company is engaged in the business of designing, manufacturing, marketing and retailing of branded apparels for women and offers top-wear, bottom-wear, drapes, combo-sets and accessories etc., catering to the varied wardrobe requirements of Indian women. The company's brand portfolio includes 3 brands as follows:

'W' - A premiere brand targeted at women's casual and workwear requirements.

Aurelia - A contemporary ethnic wear brand that grew in revenue at a CAGR of 70.8% during 2013-17.

Wishful - A premium occasion wears brand that grew in revenue at a CAGR of 66.7% during 2013-17.

To know more about the company, you can read our IPO analysis of TCNS Clothing Ltd (requires subscription).

Also, to know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.

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