Sensex Remains Buoyant; Metal Stocks Lead Gains

Tue, 28 Mar 01:30 pm

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After opening the day on a positive note, share markets in India have continued the momentum and are trading above the dotted line. Apart from stocks in the oil and gas sector, all sectoral indices are trading on a positive note. Stocks in the banking sector and stocks in the metals sector are leading the gains.

The BSE Sensex is trading up by 182 points (up 0.6%), and the NSE Nifty is trading up by 60 points (up 0.7%). Meanwhile, the BSE Mid Cap index is trading up by 0.8%, while the BSE Small Cap index is trading up by 0.9%. The rupee is trading at 65.14 to the US$.

In news from stocks in the telecom sector. Bharti Airtel share price is in focus today after the telecom major announced that it has completed the secondary sale of over 190 million shares of its subsidiary Bharti Infratel Limited.

The sold stake represents 10.3% of the company, and was sold to a consortium of funds advised by KKR and Canada Pension Plan Investment Board (CPPIB) for a total consideration of over Rs 61.9 billion, executed at a price of Rs. 325 per share.

Following the closure of this transaction, Bharti Airtel's equity holding in Bharti Infratel stands at 61.7%, and that of KKR and CPPIB at 10.3%.

This transaction makes it KKR's second investment in Bharti Infratel. Previously, the funds managed by KKR had invested in Bharti Infratel in 2008-15. Post this transaction, the stake held by KKR and CPPIB (combined) will be the single largest public shareholder block.

Airtel said it would use the proceeds of the sale primarily to reduce debt.

Debt Levels of Telecom Players on an Uptrend

Airtel recently completed the purchase of Tikona Digital Networks' 4G spectrum, to increase its market presence and capacity to provide internet services. The transaction entailed the telecom major assuming all of Tikona's debt.

The entry of Reliance Jio and the fierce tariff war it has triggered have set off brisk activity in the industry for fundraising and consolidation, as the incumbents look for ways and means to fend off the competition.

At the time of writing, Bharti Airtel share price was trading up by 0.5%, while Bharti Infratel share price was trading up by 1.9%.

Moving on to news about the economy. Industrial activity, as measured by the SBI composite index has registered growth in March, after three months of continuous decline.

The SBI Composite Index is an indicator for tracking primarily manufacturing activity in Indian economy. It uses various macroeconomic indicators such as Gross Domestic Product and Index of Industrial Production, along with various thematic indicators.

The index improved to 53.3 in March, from 49.2 in February, indicating a pick-up in manufacturing activity. The index had hit an all-time low of 45.5 in December 2016 primarily due to historically low credit growth, coupled with a reduction in consumer demand due to notebandi in India.

A composite index reading of 42 to 46 and 50 to 52 implies moderate decline and low growth, respectively, in manufacturing activity in the economy. While a 52-55 indicates moderate growth.

The current rating of 53.3 means that manufacturing activity in India grew at a moderate pace in March, as compared to low growth and moderate decline in the previous months.

According to the SBI report, manufacturing activity has picked up due to various measures taken by the government like anti-dumping duty, minimum support price in steel coupled with push in infrastructure that is railways, road, defence, port, power, smart cities.

The report also mentions that the infrastructure sector is now looking up after long periods of decline and no growth. This may indicate that companies are finally beginning to shrug off the notebandi induced slowdown.

The Reserve Bank of India (RBI) came out with a preliminary assessment of impact due to notebandi in India. The impact on Indian companies was a mixed one. There was a visible slowdown in sales growth for companies across industries.

Manufacturing companies outperformed industries and grew their sales at a robust pace of 4.9% YoY. The key thing to note is the profit margins for the companies across the board.

For manufacturing companies, margins expanded from 3.9% in December-2015 to 6.2% in this fiscal. This has resulted in a robust growth of 58% in profits for companies compared to previous year.

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