Indian Indices Erase Gains; Telecom & IT Stocks Under Pressure

Tue, 26 May 12:30 pm

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Share markets in India have erased early morning gains but are still trading on a positive note. Benchmark indices surged in early trade today, tracking gains in Asian peers.

Asian stocks rose for a second day despite escalating geopolitical risks, with Japan leading gains as the world's third-largest economy reopens.

The BSE Sensex is trading up by 165 points, while the NSE Nifty is trading up by 52 points.

The BSE Mid Cap index and the BSE Small Cap index are trading up by 0.8% and 0.4%, respectively.

Sectoral indices are trading mixed with stocks in the metal sector and banking sector witnessing buying interest, while telecom stocks are witnessing selling pressure.

The rupee is trading at 75.66 against the US$.

Gold prices are currently trading down by 0.1% at Rs 46,941.

Speaking of stock markets in general, note that the coronavirus impact has shaken markets worldwide. Indian stock markets have felt the impact too.

The Indian economy was grappling with its own issues and COVID-19 has made matters worse.

The industry was facing demand problems, due to which business houses were reluctant to undertake capex plans. Unemployment was at its peak and exports were consistently down for several months.

India's GDP growth has been on a consistent decline after peaking out at 7.9% in Q4 of FY18 to 4.7% in Q3 of FY20. This is evident in the chart below:

The numbers are expected to have fallen further in Q4FY20 due to Covid 19.

Interestingly, there's a silver lining in all this. India can become an outsourcing hub. The global slowdown will mean that countries like the US, will be looking out for low-cost outsourcing destinations like India.

Further, a lot of global buyers have already shifted to India to source ceramics, home appliances, fashion, and lifestyle goods.

Meanwhile, as per the reports, around a thousand foreign manufacturers want to relocate their production to India, a country they see as an alternative to China.

Here's an excerpt from one of the articles, co-head of Research Tanushree Banerjee wrote on Indian economic recovery:

• It's also a fact that India's importance in the global supply chain has never looked better. PM Modi himself referred to that.
  
  Therefore, utilising the stimulus package to tighten India's presence in the global supply chain will be the fastest way to move up the Swoosh index. Any delay or disregard would cost India dearly.
  
  True that Apple, Samsung and several smartphone manufacturers are already considering an expansion of their Indian capacities.
  
  But the land, labour, liquidity, and legal reforms cannot remain on paper if the Make in India dreams are to be realised.
  
  I expect to gather more cues about India's prospects on the Swoosh index over coming months.

Watch this space as Tanushree tracks these Rebirth of India megatrends closely.

Moving on, market participants are tracking Deepak Nitrite share price, Wonderla Holidays share price and Torrent Pharma share price as these companies are scheduled to announce their March quarter results later today.

In news from the telecom sector, Bharti Airtel share price is in focus today.

Shares of the company fell over 5% today after its promoter, Bharti Telecom, sold some stake in the telecom services provider through open market deals today.

Around 155.71 million equity shares representing 2.9% of total equity of Bharti Airtel changed hands on the BSE, the exchange data showed.

Reportedly, Bharti Telecom was to sell 2.8% stake worth US$ 1 billion in the telecom company via block deals. Up to 150 million shares were available for prospective investors through a book-built offering.

The shares were being offered to large, high networth investors at 6% discount to the closing price as on March 22. JP Morgan was to manage the sale with a floor price of Rs 558 per equity share.

As of March 31, 2020, Bharti Telecom held about 38.8% stake in Bharti Airtel which will be reduced by 2.8% after this deal.

Moving on to news from the FMCG sector, shares of ITC surged as much as 4% today after the company announced it has entered into an agreement with Sunrise Foods to acquire a 100% stake in the company.

In a press release, the company said that it has entered into a Share Purchase Agreement (SPA) on May 23, 2020 to acquire 100% of the equity share capital of Sunrise Foods Private Limited (SFPL), a company primarily engaged in the business of spices under the trademark 'Sunrise', subject to fulfilment of various terms and conditions as specified in the SPA.

The share-purchase agreement was completed after the lockdown was enforced and the final deal is likely to be signed soon.

Reportedly, the deal is estimated to be around Rs 20 billion.

ITC share price is presently trading up by 1.4%.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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