Sensex Finishes the Week on a Weak Note; Airtel & Idea Surge

Fri, 20 Jan Closing

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Share markets in India finished deep in the red as selling pressure intensified in the afternoon session. At the closing bell, the BSE Sensex stood lower by 274 points, while the NSE Nifty finished down by 86 points. The S&P BSE Mid Cap & the S&P BSE Small Cap finished down by 1.5% and 1.3% respectively. Metal sector lost the most, followed by PSU and power stocks.

Asian markets finished mixed as of the most recent closing prices ahead of the inauguration of President-elect Donald Trump. The Shanghai Composite gained 0.70% and the Nikkei 225 rose 0.34%. The Hang Seng lost 0.71%. European markets are mixed. The CAC 40 is higher by 0.17%, while the FTSE 100 is leading the DAX lower. They are down 0.08% and 0.04% respectively.

The rupee was trading at 68.09 against the US$ in the afternoon session. Oil prices were trading at US$ 52.78 at the time of writing.

Idea Cellular share price jumped 2.7%, following a report by CLSA, the brokerage and investment group, on a potential merger with Vodafone India. The merger, if it happens, will be complementary to their operational strengths and will also pave the way for a backdoor listing of its business without going through an IPO process.

Vodafone is reportedly looking for an alliance with either Reliance Jio or Idea. The report states that the combined entity of Vodafone and Idea will have a 43% revenue market share versus the 33% of Bharti Airtel currently and 13% for Reliance Jio by FY19 consolidated.

Stock Price of Idea has corrected 34% in the last six months

With their 3G network across India and highest 4G spectrum of 1800MHz, the combined entity will be a strong competitor in the data market.

The merger, however, will not be without regulatory hurdles. The rules mandate that subscriber and revenue market shares have to be below the 50% mark in such cases, while spectrum holdings have to be below specified caps.

Reportedly, Bharti Infratel will be a loser, as tower rationalization (given common towers between Idea and Vodafone) means Indus will lose 14,000 tenancies and Infratel 4,000 tenancies.

Also, Bharti Airtel share price finished the trading day on an encouraging note (1.6%) after it was reported that the company will consider raising of funds through issue of debentures/bonds through the private placement route.

Airtel is looking to create a war chest as it battles the onslaught from Jio's operations. Jio's offers have shaken up the telecom industry with established players such as Airtel, Vodafone and Idea Cellular announcing deep cuts in voice and data tariffs.

Moving on to news from stocks in steel sector. According to an article in The Financial Express, the government wants PSUs under the steel ministry such as Steel Authority of India Ltd SAIL and NMDC to divest their non-core assets and concentrate on their core competencies. These firms will also be asked to devise a policy for future investment concentrating on value-added products, as per the draft national steel policy 2017.

The draft policy said CPSEs have primarily focused and invested more in brown-field expansion of similar steel capacity with limited value addition in terms of high-end product development so far.

Talks on selling non-core assets for SAIL have been going on for quite some time now. However, progress has not been significant. It is now on the lookout for buyers for its three loss-making arms for a strategic disinvestment.

NMDC is building a 3 mtpa steel plant. Talks were earlier there in the ministry that it should not have any business to be in steel-making.

The report also stated that the ministry will encourage the CPSEs to develop a policy for future investment, so that impetus could be given for development of value-added steel capacity and adoption of latest technologies at par with global best practices.

In another development, SAIL has managed to widen its export base to Europe with Rourkela Steel Plant flagging off its maiden export consignment from its new Plate Mill. The Mill, which was inaugurated in February 2015, was part of steel plant's Rs 12,000 crore modernization plan to raise capacity to 4.5 million tonne from the existing 2 million tonne.

SAIL share price finished the trading day down by 2% on the BSE.

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