Telecom Sector Updates, December Quarter Results, and Top Cues in Focus Today

Mon, 20 Jan Pre-Open

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Indian share markets witnessed volatile trading activity on Friday and ended on a flat note.

Among BSE sectoral indices, energy stocks gained the most, followed by telecom stocks and healthcare stocks.

The BSE Sensex closed higher by 13 points to end the day at 41,945. Bharti Airtel and Reliance Industries were among the top gainers.

While the broader NSE Nifty ended down by 3 points to end at 12,352.

The BSE MidCap index ended the day up by 0.5%, while the BSE SmallCap index ended the day up by 0.4%.

Speaking of the BSE SmallCap index, note that the index is up 19% from its August 2019 low. The index hit its lowest level since 2018 on 22 August 2019 when it closed at 12,119.

But since the August 2019 low, smallcaps have been making a comeback. In fact, since the start of 2020, the uptrend has accelerated!

Have a look at the chart below...

Of the 704 stocks in the index, 532 stocks have gained during this period, whereas 170 stocks have continued to bleed.

The 532 stocks that gained have gone up by an average of 30%. The 170 smallcap stocks that reported declines are down 18% on average.

You can see the smallcap index is rebounding to levels we saw in the first half of 2019. In fact, it is just 1% below the level it was a year ago.

But it is still 28% below its 2018 all-time high of 20,047! To go back to the 2018 peak, the index would have to rise another 39%.

So, is this smallcap rebound here to stay? Will 2020 be the year of smallcaps?

Ankit Shah, the editor of daily premium newsletter Equitymaster Insider (requires subscription), has been talking about this rebound since a long time.

As per him, this is a great time to be invested in smallcaps where you can find a lot of great buying opportunities.

Results Corner

From the chemical sector, Rallis India's profit before tax more-than-doubled at Rs 483 million in December quarter (Q3FY20).

The Tata Group agrochemicals company had posted profit before tax of Rs 196 million in the same quarter last fiscal.

The company recorded consolidated revenues of Rs 5.3 billion for Q3FY20, a growth of 28% over previous year's quarter of Rs 4.2 billion.

Net profit jumped 177% to Rs 381 million from Rs 140 million in the year-ago quarter.

Earnings before interest, tax, depreciation, and amortization (EBITDA) margin expanded by 380 basis points to 10.4%.

The company's management said that during the current crop season its business was supported by positive farmer sentiment, new product launches and refreshed trade policies.

To know more, you can read Rallis' Q3FY20 latest result analysis on our website.

From the IT sector, TCS share price reported 0.2% year-on-year (YoY) growth in its net profit at Rs 81.2 billion for Q3FY20.

Revenues rose 6.7% YoY to Rs 398.5 billion. In terms of constant currency, revenues grew 6.8% year on year, with operating margin expanding to 25%.

The company also declared an interim dividend of Rs 5 per share.

Supreme Court Dismisses Plea by Telcos for AGR

From the telecom sector, market participants will be closely tracking Vodafone Idea share price and Bharti Infratel share price today. Shares of these companies witnessed huge selling pressure yesterday after the Supreme Court rejected a plea by the telecom operators to review its October 24 verdict that had widened the definition of adjusted gross revenue (AGR).

However, shares of Bharti Airtel witnessed buying yesterday on hopes that it would gain market share in case of further consolidation in the industry.

The plea was filed by Vodafone Idea, Bharti Airtel and Tata Teleservices. The SC judgement left the three telcos collectively facing more than Rs 1.02 lakh crore in additional licence fees, spectrum usage charges (SUC), penalties and interest.

The government has estimated VIL's dues in the AGR matter to be more than Rs 530 billion, including over Rs 280 billion in licence fee, interest and penalties and the rest on spectrum usage charges. However, the company's internal calculation pegs it at Rs 440 billion.

The Supreme Court has asked them to pay the dues by January 23, leaving them with barely a week's time.

The telcos have an option to file a curative petition with the apex court, as well as, seek an extension of the due date.

How this development pans out in the coming week remains to be seen. Meanwhile, we will keep you updated on all the news from this space.

Jet Airways Planning to Sell Netherlands Business

In the news from the aviation sector, Jet Airways is planning to sell its Netherlands business to KLM Royal Dutch Airlines.

Providing an update, the company said there is a separate liquidation proceeding ongoing in Netherlands and that the resolution professional has agreed a co-operation protocol with the Dutch trustee appointed by the local court.

It added that if the transaction is completed, it would only involve a sale of part of the Jet Airways business activities and would not impact the shareholding pattern of the company in any manner.

The beleaguered airline had shut its operations in April last year due to severe cash crunch.

Jet Airways was admitted under the insolvency process on June 20, 2019, after its bankers failed to find any takers despite months of negotiations.

The airline stopped flying on April 17 and it had around 14,000 employees on that date.

Reportedly, creditor claims on the airline are for Rs 360.9 billion, of which Rs 146.4 billion had been admitted as on October 20.

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