Sensex Trades Strong; Bharti Airtel Hits 10-year High

Wed, 1 Nov 01:30 pm

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After opening the day in green, Share markets in India have continued the momentum and are presently trading above the dotted line. Sectoral indices are trading on a positive note, with stocks in the realty sector and stocks in the banking sector witnessing maximum buying interest.

The BSE Sensex is trading up by 405 points (up 1.2%) and the NSE Nifty is trading up 105 points (up 1%). Meanwhile, the BSE Mid Cap index is trading up by 0.7%, while the BSE Small Cap index is trading up by 0.9%. The rupee is trading at 64.54 to the US$.

In news from the manufacturing sector. Indian manufacturing activity lost momentum in October. The sector which showed signs of rebounding in September grew sluggishly in response to subdued demand conditions. Previously, manufacturing activity had contracted sharply in July following the launch of the Goods and Services Tax (GST).

According to the Nikkei Purchasing Managers' Index (PMI) survey by Markit, India's manufacturing lost steam in October after a sustained recovery in August and September. The PMI had contracted sharply in July. Introduction of the GST weighed heavily on the Indian manufacturing industry in July.

The PMI is the reading of the country's manufacturing sector output and is updated monthly. A reading above 50 indicates expansion, while any score below the mark denotes contraction.

PMI in October stood at 50.3, declining from the 51.2 reading in September. Both purchasing activity and pre-production inventories decreased due to subdued demand.

Manufacturing Activity Weakens in October

The report said that the downward movement in the headline index was partly driven by a stagnation in new business. The report linked subdued demand conditions to negative impacts of GST. Meanwhile, new export orders for Indian goods reduced in October. Moreover, the rate of contraction was the fastest since September 2013.

October PMI data painted a dull picture as the sector lost pace in the bid to recover from the disruptions caused by the introduction of the GST in July.

However, on a positive note, firms added to their payroll numbers at a similar pace to September's 59-month high in response to greater volumes of outstanding business.

On the price front, input cost pressures rose at the fastest pace since May. Subsequently, firms reportedly raised their output prices to pass on greater cost burden to clients and protect their profit margins. The data comes as the Reserve Bank of India's (RBI's) Monetary Policy Committee kept interest rates unchanged last month because it anticipates upside risks to retail inflation. It also slashed its growth projections for the current fiscal and raised its inflation projections.

It also slashed its growth projections for the current fiscal and raised its inflation projections.

The six-member monetary policy committee (MPC) kept the repurchase rate-the rate at which the central bank infuses liquidity in the banking system-unchanged at 6.00%. The central bank maintained its neutral policy stance but acknowledging sluggish economic activity, lowered its fiscal 2018 projection for gross value added, a growth metric, to 6.7% from 7.3%.

Moving on to news from stocks in the telecom sector. Bharti Airtel share price is sizzling on the bourses today amid a host of positive news.

Bharti Airtel's share price touched a fresh 10-year high today, rising over 9% after the company declared its quarterly results. The rally was also fueled by hope of early sale of its tower business.

The telecom major reported a 76% fall in consolidated net profit at Rs 3.4 billion for the second quarter. It had posted Rs 14.6 billion in the year-ago period.

Consolidated revenue also declined by around 12% to Rs 217.8 billion (Rs 246.5 billion).

Revenues from India stood at Rs 167.3 billion, a fall of 13% year-on-year (YoY), led by a mobile drop of 17% YoY, the company stated.

However, Bharti Airtel's Africa business recorded a 7.2% growth quarter-on-quarter at Rs 52 billion, fueling positive sentiment.

Further, the company also announced that it had been approached by a few reputed global investors to acquire a significant stake in Bharti Infratel which, if accepted, could result in such investors acquiring control of Bharti Infratel.

Airtel owns 58% in Bharti Infratel, and the company's committee of directors formed in 2016 to evaluate selling stake in Bharti Infratel recommended that such proposals be duly considered, the company said.

The move comes in a day after Airtel's subsidiary Bharti Infratel said that it aims to buy the stake it doesn't own in its Indus Towers Ltd unit from Vodafone India Ltd, Idea Cellular Ltd and a private equity investor.

Indus Towers is a joint venture between Vodafone India, Bharti Infratel and Idea Cellular. Vodafone and Bharti Infratel own 42% each while Idea owns 11.2%. US private equity firm Providence owns the balance 4.8%.

At the time of writing, Bharti Airtel share price was trading up by 8.9%.

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