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Sensex Opens Strong; Tata Steel Up 2.3%
Thu, 8 Dec 09:30 am

Asian stock markets are higher on Thursday, following the record gains overnight on Wall Street and on expectations that the European Central Bank will extend its asset purchase program at its monetary policy meeting later in the day. The Nikkei 225 is up 0.82% while the Hang Seng is up 0.60%. Stock markets in Europe also closed their previous session on a positive note.

Meanwhile, Indian share markets have opened the day on a strong note. BSE Sensex is trading higher by 260 points and NSE Nifty is trading higher by 81 points. Meanwhile, both S&P BSE Mid Cap and S&P BSE Small Cap are trading higher by 0.8% respectively. The rupee is trading at 67.87 against the US$. Gains are largely seen in auto and metal stocks.

Tata Steel's share price opened up by 2.3% after the company pledged to stay in Britain with a 10-year commitment to a one-billion-pound investment plan as part of crucial talks with steelworkers' unions to save thousands of jobs in the UK.

Tata Steel offered a number of guarantees to its staff at Port Talbot steelworks in south Wales which is UK's largest steel plant, including a minimum five-year guarantee to keep both furnaces operational at the site.

Tata will next week start a consultation with its employees on a proposal to close the British Steel Pension Scheme, which has liabilities of over 15 billion pound, and offer employees a "competitive defined contribution scheme" in its place.

Industrial group Thyssenkrupp, which has long been seeking a solution for its ailing steel business, has insisted it is not prepared to take on Tata's pension liabilities in the event of a merger. Moreover, the company has made clear that its primary aim in merging with Tata is to combat overcapacity in the steel sector.

In another development, since surprise exit of Cyrus Mistry and his surprising revelations, the group has lost around 15% of their market capitalization. In numbers, the group has lost around Rs. 1.16 trillion. TCS, Tata Motors, Titan and Tata Steel have seen maximum value erosion due this event.

TCS, the Biggest Loser in the Tata Group Dispute

As the chart highlights, TCS accounts for a lion's share of the loss, with its market cap going down by Rs 534 bn, nearly half of the total loss borne by the group.

Moving on to news from stocks in telecom sector. According to an article in The Financial Express, the telecom industry is expected to take a hit of 5-7% on revenue during the next two quarters on account of demonetisation and competitive pressures, intensified by extension of free services by newcomer Reliance Jio.

At a time when the industry is already facing pressures on the operating metrics, owing to heightened competition, the extension of free services by RJio is expected to further push down the realisations in both the voice and the data segments. This comes at a time when the telecom industry is reeling under 4.25 trillion debt.

As per the report, the impact is expected to be aggravated by demonetisation which can lead to revenue loss of the telcos especially in the pre-paid segment.

In another development, the Indian telecom sector has received foreign direct investment (FDI) of US$10 billion in the first eight months of the current fiscal. The FDI which was US$1.3 billion in 2014-15, US$2.9 billion in 2015-16 has jumped up to more than US$10 billion in the first eight months of 2016-17.

At a time when the country is undergoing a demonetisation drive of higher denomination Rs 500 and Rs 1,000 notes, every day more and more people are logging into online payment modes and online banking transactions.

Telecom stocks opened the trading day on a positive note with Tata Communications and AGC Networks leading the gains.

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