Indian Indices Recover; Sensex Ends 100 Points Higher

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After opening the day on a negative note, Indian share markets witnessed buying interest during closing hours and ended their trading session marginally higher.

Sectoral indices ended on a mixed note with stocks in the telecom sector, automobile sector and IT sector witnessing buying interest, while metal stocks and power stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 100 points (up 0.3%) and the NSE Nifty closed up by 17 points (up 0.2%). The BSE Mid Cap index ended the day up by 0.2%, while the BSE Small Cap index ended the day down by 0.4%.

Asian stock markets finished on a negative note. President Donald Trump escalated his trade war with China, announcing that he would impose a 10% tariff on US$ 300 billion in Chinese imports that aren't yet subject to US duties after setbacks in negotiations with Beijing.

As of the most recent closing prices, the Hang Seng was down 2.4% and the Shanghai Composite stood lower by 1.4%. The Nikkei 225 was down 2.1%.

In news from the banking sector, State Bank of India (SBI) reported a net profit of Rs 23.1 billion for June quarter on the back of healthy growth in advances and stable asset quality. The bank had reported a net loss of Rs 48.8 billion in the corresponding quarter of the previous fiscal.

The profit beat analysts' expectations who had pegged the profit at Rs 20.7 billion.

Asset quality improved with gross non-performing assets (GNPA) at Rs 1.68 lakh crore, down 21%, from Rs 2.13 lakh crore reported in Q1FY19. It was down 2.8% sequentially from Rs 1.73 lakh crore in Q4FY19.

Net NPAs came in at Rs 656.2 billion, down 0.4% QoQ from Rs 658.9 billion. Asset quality remained stable with gross non-performing assets as a percentage of total loans standing at 7.53% at June-end, lower than 10.69% in the same period last year.

Provisions came in at Rs 91.8 billion. The management in a statement said that, "the bank has made provisions of Rs 9960 million for the quarter ended June 2019 towards arrears of wages due for revision w.e.f November 1, 2017."

Net interest income (NII) stood at Rs 229.4 billion, up 5.2%, from Rs 218 billion earned in the same quarter of the previous fiscal.

SBI share price ended the day down by 2.9%.

Moving on to news from the telecom sector, Bharti Airtel share price was in focus today. Shares of the company climbed 5% in early trade today after the telecom operator reported an improved margin and industry- best average revenue per user (ARPU) for the June quarter.

ARPU continued to increase for the second consecutive quarter. Overall ARPU for the quarter was Rs 129 as compared to Rs 105 in the corresponding quarter last year.

However, the telecom company posted its first quarterly net loss in over a decade at Rs 28.7 billion. Reportedly, the losses were mainly due to stiff competition from Reliance Jio and depreciation of 3G network equipment and operating costs on network reframing.

Consolidated EBITDA (earnings before interest, tax, depreciation and amortization) margin improved to 41% during the quarter as compared to 34.5% in the corresponding quarter last year.

Company's expansion in mobile broadband towers rose 2.6% to 177,141 towers. Data usage per customer also saw an improvement, up 8% vis-a-vis 4.9% in March quarter.

In terms of revenue, the company was able to retain its top spot in the market as its top line was up 2.8% at Rs 153.5 billion. Vodafone Idea posted revenue of Rs 112.7 billion in the June quarter and Reliance Jio's revenue was Rs 116.8 billion.

Meanwhile Airtel Africa, the other key business segment, reported a steady quarter with revenue and operating profit growing slightly from the March quarter.

Note that Bharti Airtel has been the victim of loss of pricing power in the sector. Sliding operating margins had a direct impact on the company's return on equity over the past decade. And the poor operating numbers apart from debt heavy balance sheet weighed on the valuations.

Bharti Airtel's Sliding Valuations

Here's what Tanushree Banerjee wrote about it in one of the editions of The 5 Minute WrapUp...

• Just as pricing power helps businesses create shareholder wealth, the lack of it can destroy wealth.
  
  How?
  
  Just look at the top telecom companies in India.
  
  They had healthy financials about a decade back. But intense competition and lack of pricing power brought them to their knees. Shareholder wealth is a now a thing of the past for the sector.
  
  So, never assume that a business which grew 10 times in the past will repeat that feat.

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