Banks & IT stocks lead the gains

Fri, 27 Dec 11:30 am

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   09:30 am   

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After opening firm, the Indian Indices are trading well above the dotted line in the morning session. All sectoral indices except Energy are trading in the green. The buying interest is the highest in banking and software stocks.

The BSE Sensex is trading up 105 points and the NSE-Nifty is trading up 30 points. The BSE Mid Cap index is trading up 0.5% and the BSE Small Cap index is trading up 0.4%. The Rupee is trading at 62.06 to the US Dollar.

Most software stocks are trading higher today. Tech Mahindra and Tata Consultancy Services (TCS) are among the stocks leading the gainers. As per a leading business daily, the software sector is currently facing some key challenges according to an industry study conducted by the consultancy firm Zinnov. The study has found that the existing business model of Indian IT firms could become redundant in a few years. As per the study, the sector is at an inflection point and Indian IT firms will have to initiate a lot of steps of a transformational nature within their organizations. Some of the steps would be; a more geographical focus as opposed to the current vertical focus, volume growth at the expense of margins and promotion of sales oriented leaders at the expense of technical staff within the firm. This would cause severe problems for most firms related to attrition and margins and it could also lead to consolidation among tier-2 players within the sector. It would be very difficult for these firms to undertake such an exercise while trying to maintain their quarterly financial performance. While none of this will happen in 2014, the trend towards a new business model in the IT sector has certainly begun.

Most telecom stocks are trading positive today. Tata Communications and Idea Cellular are among the stocks leading the gainers. According to leading financial daily, top GSM operators have written to the Prime Minister requesting the government to lower the spectrum usage charge (SUC) before the 2G auctions which are to be held in January. The telcos Bharti Airtel, Idea Cellular and Vodafone have stated in their letter that the high SUC (currently between 3-8%) will act as a big disincentive for them to participate in the auction. The SUC is the charge that telcos pay for the using spectrum. It increases along with the amount of spectrum held by them. They have asked the government to lower the SUC to a flat rate of 3% as recommended by the regulator TRAI. Although the department of telecom (DoT) had previously rejected the TRAI proposal, it is now examining the issue again. The telecom commission, the highest decision making body in the telecom ministry, is expected to meet on December 31 to consider this issue.