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Sensex Reclaims 32,000 Level; Wipro, RIL Top Gainers
Fri, 21 Jul Closing

Indian share markets edged higher in the afternoon session and finished the trading day on a firm note. At the closing bell, the BSE Sensex stood higher by 124 points, while the NSE Nifty finished up by 42 points. The S&P BSE Mid Cap finished flat while & S&P BSE Small Cap finished down by 0.1%. Gains were largely seen in software stocks, oil & gas stocks and consumer durables stocks.

Shares of broadcasting firms, Cable TV providers and telecom companies fell after Mukesh Ambani said Reliance Jio will offer made-in-India phones at no effective cost. The phones will feature free voice calls, affordable Internet data and cable to connect to TV.

Dish TV India share price fell 5.9%, while Sun TV Network share price and Hathway Cable & Datacom Ltd share price finished down by 3.5% respectively on the BSE.

Reliance Jio Infocomm Ltd will effectively give away the phone to users against a fully refundable security deposit of Rs 1,500 which will be returned in three years. JioPhone customers will not have to pay for voice charges and will have access to unlimited data for Rs 153 a month. The Jio board also approved raising another Rs 200 billion through a rights issue.

Telecom stocks plunged in today's trade with Bharti Airtel share price falling 2.2%, while Idea share price slumped 3.3%.

Meanwhile, Reliance Industries share price surged 3.7%.

Asian stock markets finished lower today with shares in Japan leading the region. The Nikkei 225 is down 0.22% while China's Shanghai Composite is off 0.21% and Hong Kong's Hang Seng is lower by 0.13%. European markets are higher today with shares in London leading the region. The FTSE 100 is up 0.28% while Germany's DAX is up 0.07% and France's CAC 40 is up 0.01%.

The rupee was trading at Rs 64.31 against the US$ in the afternoon session. Oil prices were trading at US$ 47.12 at the time of writing.

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Wipro share price surged 6.5% in today's trade after the company posted a 1.2% rise in its consolidated net profit at Rs 20.77 billion for the April-June quarter. The company had registered a net profit of Rs 20.52 billion in the year-ago period. Its total income grew marginally to Rs 142.81 billion during the first quarter.

The company also gave out a guidance for the IT services' business in the range of -0.5% to 1.5% or US $1,962 million to US$2,001 million.

Besides, the company's board has announced a share buyback proposal of Rs 110 billion entailing 343 million equity shares at Rs 320 apiece.

Software stocks finished strong with Wipro, TCS share price and HCL Tech share price leading the gains.

In news from economy, with a view to boost manufacturing, exports and job creation in India, the government is likely to unveil Rs 26 billion incentive package for the labour intensive leather and footwear sector. The expenditure finance committee has already given its approval to the package and a draft cabinet note has been circulated to different ministries for their views.

The scheme, which includes both tax and non-tax benefits, was prepared on the lines of the package announced for the textiles sector in June last year. Reportedly, the commerce and industry ministry, which mooted the proposal, has sought tax incentives for the 'Indian Footwear, Leather, and Accessories Development Program'. Besides, support has been sought to improve tax incentives for employment generation.

The sector assumes significance as it is a thrust segment under the 'Make in India' initiative. According to industry, Rs 10 million investment in the sector results in creation of jobs for about 250 people. Currently, about 3 million people are directly employed in the sector. The government aims to increase the sector exports to US$15 billion by 2020 from the current US$7 billion.

Moving on to news from banking sector. As per an article in The Livemint, IDBI Bank Ltd has decided to sell its entire 5% stake in Clearing Corp. of India Ltd (CCIL).

This comes at a time when the company looks to strengthen its weak capital base through the sale of assets that are not central to its main business. Reportedly, the bank is aiming to garner around Rs 50 billion in this financial year through sale of non-core assets.

The Reserve Bank of India recently invoked so-called prompt corrective action against IDBI Bank because of its rising bad loans and negative return of assets.

Banks under PCA are mandated to step up recoveries of bad loans, reduce risky loans, strengthen their capital base and restrict branch expansion, among other measures, to improve their balance sheet.

Rising Bad Loans at Indian Banks

Gross non-performing assets (GNPA) of Indian banks rose from 9.2% in September 2016 to 9.6% in March 2017. GNPA refers to the total value of loans on which interest and principal income has not been received by the bank for more than ninety days. For some banks, the ratio of GNPAs to total lending is more than 20%. This means more than Rs 20 out of every Rs 100 lent is at the risk of not coming back.

The RBI expects the average GNPA ratio to increase to 10.2% by March 2018. It indicated that if macroeconomic conditions worsen, this number could go up.

IDBI Bank share price finished the day up by 1.1%.

And here's a note from Profit Hunter:

It was a volatile day for the telecom stocks today amid Reliance Industries' 40th annual general meeting. RIL was up 3.6%, Bharti Airtel was down 2.10%, and Idea down 3.60%.

Have a look at the comparative intra-day chart of all three stocks:

Telecom Incumbents Under Pressure
Telecom Incumbents Under Pressure 

Telecom stocks dropped sharply this afternoon (except RIL) after RIL Chairman and Managing Director Mukesh Ambani announced the launch of much-awaited 4G feature phone at an effective price of Rs 0 at the AGM. Meanwhile, RIL traded strongly at its new 52-week high with healthy volumes.

The sector has been under immense pressure after Reliance Jio entered the space. And now, after this impressive offer, the incumbents are feeling even more heat.

Although Bharti Airtel and Idea recovered some of their losses by the end of the session, both ended the session with sizable losses. So after today's announcement at the AGM, it will be interesting to see if the rest of the telecom sector continues to feel the heat from Reliance Jio.

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Aug 18, 2017 01:14 PM

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