Markets re-coup early losses

Wed, 9 Feb 11:30 am

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After starting today’s session on a negative note Indian indices have managed to re-coup losses in the previous two hours of trade and are currently trading firm. Stocks from realty and power space have taken a beating while stocks from oil & gas and banking space are trading firm.

Currently, the BSE-Sensex is up by 30 points while NSE-Nifty is trading 9 points above the dotted line. However,BSE Midcap and BSE Small cap indices are both down by 1.25% and 1.63% respectively. The rupee is trading at 45.24 to the US dollar.

Energy stocks are trading weak with Gujarat State Petronet and MRPL leading the pack of losers. However, ONGC and Reliance Industries are trading firm. GAIL is in preliminary talks with GVK Power & Infrastructure Ltd and GMR Infrastructure to set up 5 mtpa LNG terminal at an estimated cost of Rs 40 bn. The terminal will be either a floating or an on-land facility and a MoU to this effect is expected to be signed shortly. It may be noted that setting up an LNG terminal has been a priority for private companies so as to ensure LNG supplies for their gas-fired power projects. Further, as India just has only two LNG re-gasification terminals setting up a third one will provide new opportunity for GAIL and assured gas supply for the two private sector firms who have investments in power space. Lastly, it may be noted that the success of any LNG terminal, where LNG is brought in ships (liquid form) and re-gasified depends on the ability of the firm to source LNG from international market at competitive prices.

Telecom sector is trading weak led by ITI Ltd and MTNL. As per a leading financial daily, telecom regulator TRAI has recommended fixing the price for 6.2 Mhz of pan-India start-up 2G spectrum at Rs 109.7 bn. This is more than six times the present cost of Rs 16 bn. In its recommendations to the Department of Telecom (DoT), TRAI has also said that every Mhz of additional spectrum (on an all-India basis) beyond the contracted limit of 6.2 Mhz would cost a additional Rs 45.7 bn. Most of the telecom firms, including Bharti, Vodafone, Idea, Reliance Communication and state-owned companies like BSNL and MTNL, hold extra spectrum beyond 6.2 Mhz. These new norms would put a huge financial burden on these companies.

It is believed that Bharti Airtel is now facing a liability of Rs 40 bn, Idea Cellular Rs 13 bn, MTNL Rs 8 bn and Reliance Communication Rs 0.7 bn as a result of these recommendations. Furthermore, the licenses of some of the operators, including Bharti, are due for renewal after completing 20 years periodicity in several circles. These operators would have to pay to renew their licenses as per the new norms recommended by TRAI.