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Sensex Opens on a Strong Note; Tata Motors Soars 5%
Tue, 3 Oct 09:30 am | Karan Janani, TM Team

Asian stocks markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.77% while the Hang Seng is up 1.59%. Markets in US closed at record highs on Monday's trade as Wall Street kicks of Q4 on a high note.

Meanwhile, Indian share markets too have opened the day in green. BSE Sensex is trading higher by 253 points and NSE Nifty is trading higher by 68 points. S&P BSE Mid Cap and S&P BSE Small Cap are trading up by 1% respectively. Gains are largely seen in consumer durables stocks, auto stocks and realty stocks. The rupee is trading at Rs 65.35 against the US$.

Reliance Communications share price plunged 5% in opening trade as the company called off the merger of its wireless services business with Aircel Ltd, citing regulatory delays and opposition from some creditors, in a development that will further impede its efforts to pare its huge debt.

RCom said it is now looking at alternative ways to reduce its debt, including sale of real estate assets and "optimization of spectrum".

As per an article in The Livemint, the company plans to adopt a 4G-focused policy, which would enable it to monetize its 2G and 3G spectrum. It has also put on sale real estate assets in Hyderabad, Chennai and Navi Mumbai.

The moves will pare debt significantly and bring relief to the company, which has been negotiating loan repayment terms with creditors. RCom is weighed down by Rs 450 billion of debt.

In another development, as per Business Standard, the Tata group is preparing to shut down a large part of its telecom business and an announcement is likely later this month.

High debt and intense competition have made many businesses unfeasible, triggering a series of mergers and sell-offs. While Tatas were engaged in talks to sell their telecom business to players such as Bharti Airtel and Vodafone, deals failed to fructify.

Telecom Sector: A decade of Underperformance

Speaking of difficult businesses, 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 an inch from its levels of 2008.

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, market participants have suffered.

Moving on to news from automobile stocks. Tata Motors share price opened the trading day up by 5.3% on the BSE after the company reported a 25% increase in domestic sales at 53,965 units in September.

The sales were boosted by a strong customer acceptance of SCR technology and the continued ramp up of our BS4 vehicles production. The company's overall commercial vehicle sales grew 29 % at 36,679 units in the reporting period.

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The sales grew on the back of strong ramp-up in production, growing demand for new product launches and higher customer uptick owing to peak festive season buying trends across segments. Additionally, the sales were boosted by strong growth in e-commerce segment sales and growing demand under Swachh Bharat drive.

The medium and heavy commercial vehicle (MHCV) trucks segment grew by 25%, at 12259 units, in September 2017.

Auto sales are expected to remain buoyant in the current month as Dhanteras and Diwali, which fall on 17 and 19 October, respectively, are also considered auspicious for purchases of consumer durables and automobiles.

However, volumes are expected to moderate once the festive demand dries up from November and weak economic cues weigh down sentiments.

In news from energy sector, as per an article in The Economic Times, Hindustan Petroleum Corporation has won an arbitration award of Rs 8.06 billion against Malaysia's M3nergy Berhad.

The arbitration win for HPCL is likely to impact the final valuations of its proposed merger with ONGC as the former's share price is set to increase with inflow of cash worth close to 90% of its June quarter net profit of Rs 9.25 billion.

HPCL share price opened the trading day up by 1.5%.

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