Sensex Opens Flat, Telecom Stocks Surge

Mon, 20 Feb 09:30 am

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Asian stock markets are trading mixed in morning trade. The Nikkei 225 is down 0.14%, while the Hang Seng and the Shanghai Composite trading up by 0.37% and 0.73% respectively. Meanwhile, stock markets in the US and Europe closed their previous session on a flat note.

Meanwhile, Indian share markets have opened the day on a flat note. The BSE Sensex is trading lower by 20 points and the NSE Nifty is trading lower by 5 points. Meanwhile, S&P BSE Mid Cap and S&P BSE Small Cap are trading higher by 0.1% and 0.3% respectively. Gains are largely seen in IT stocks and power stocks. While metal stocks and pharma stocks lead the losses.

The rupee is trading at 67.04 against the US$.

TCS share price opened the trading day up by 1.2% on the BSE as the board of TCS will meet today to discuss a share buyback. Top Indian IT companies, which have huge cash piles on their books, are under pressure to return some of it to shareholders in the form of share buyback as the overall industry growth slows down.

According to an article in The Financial Express, Tata Steel is looking at building a distribution network and its brands in the Business to Consumer (B2C) markets in Bangladesh and Myanmar. Bangladesh and Myanmar are the two B2C markets which have a similar profile as India.

According to company's MD, the country's steel industry has been spending less towards research and development (R&D) compared to global standards. Indian steel industry is spending less than 0.5% of the revenue towards R&D.

The Managing Director also mentioned that steel processing facilities in India have not been keeping up with the high-end requirements of steel products in the automobile sector.

Tata Steel share price opened the trading day down by 0.4% on the BSE.

In another development, the country's steel production and consumption are likely to remain higher in 2017-18 from 89.79 MT of crude steel during 2015-16 backed by an increase in infrastructure allocation in the budget.

According to an article in The Livemint, the country has gained the position of third largest crude steel producer in the world and is largely focusing on increasing production. However, focus at the same time should be on increasing consumption of steel and reducing the dependence on cheap imports.

Steel Demand has Outpaced Supply Over the Last 5 Years in the Country

Post-notebandi, steel consumption is expected to remain under pressure in the coming few months to a certain extent. This is because it is likely that the demand for steel from the user industries like construction, real estate will take some time to strengthen. However, government push towards infrastructure will compensate for this reduction in demand, the report noted.

Moving on to news from stocks in the telecom sector. According to an article in The Economic Times, Reliance Communications and the Tata Group are believed to have initiated talks to explore a possible union that could see Tata Teleservices join forces with the merged RCom-Aircel and MTS.

This move could make them third largest telecom company behind the proposed Vodafone-Idea combined and Bharti Airtel, amid intense competition triggered by Reliance Jio Infocomm's entry. Tata Tele's debt will be a big factor in any talks with the RCom-Aircel combine

The fragmented but intensely competitive telecom market, currently led by Bharti Airtel, is on the brink of major consolidation as the intense price war triggered by Reliance Jio has left most telcos bleeding.

The balance-sheet of major telecom operators in India -- Bharti Airtel, Idea Cellular and Reliance Communications -- came under major pressure in the third quarter of the current fiscal and the trend is likely to continue in the fourth quarter as per the reports.

Bharti Airtel's net profit for the third quarter of 2016-17 dropped by 55%, while Idea Cellular reported a loss of Rs 4.78 billion for the same quarter. Reliance Communications too posted a net loss of Rs 5.31 billion in the quarter.

Telecom stocks opened the trading day on a strong note with Tata Teleservices share price and Idea Cellular share price leading the gains.

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