Indian Indices Trade on a Volatile Note; Tata Motors, Yes Bank Among Top Losers

Fri, 25 Oct 12:30 pm

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Share markets in India are presently trading on a flat note. Sectoral indices are trading mixed with stocks in the telecom sector and power sector witnessing selling pressure, while oil & gas stocks and IT stocks are witnessing buying interest.

The BSE Sensex is trading down by 42 points (down 0.1%), while the NSE Nifty is trading down by 12 points (down 0.1%). The BSE Mid Cap index is trading up by 0.2%, while the BSE Small Cap index is trading down by 0.1%.

The rupee is currently trading at Rs 70.97 against the US$.

Amid the volatility witnessed in stock markets lately, Tanushree Banerjee, in the video below, talks about the Rebirth of India phenomenon and how 3 specific trends are racing ahead even in these gloomy times.

Tune in to find out more...

In news from the telecom sector, Vodafone Idea share price is witnessing selling pressure today after the Supreme Court (SC) on Thursday rejected telecom companies' appeal against the government's definition of Adjusted Gross Revenue (AGR). The apex court will later decide on the timeframe for the operators to pay.

Shares of the company hit new all-time lows of Rs 3.66, plunging 35% in the past two trading days on back of the above news.

The Cellular Operators Association of India (COAI) had in 2005 filed the first case, challenging the government's definition on calculation of AGR.

It had contended that the components of AGR, which the government was trying to include, were contrary to the Telegraph Act and the recommendations made by the Telecom Regulatory Authority of India (TRAI).

Reports state that the total dues to be paid to the government amount to Rs 926.4 billion.

After the Supreme Court's decision, Vodafone Idea released a statement saying, "clearly this judgment has significantly damaging implications for India's telecom industry, which is already reeling under huge financial stress and is left with only four operators."

According to rating agency CARE Ratings, the decision comes as a major step back to the incumbent telcos as it implies higher payments when the industry is facing price-war and intense competition.

Reports also state that the demand/penalty imposed on the telecom industry will prove to be catastrophic as the industry is in deep financial distress.

Operators like Reliance Communications, Aircel, Telenor and Tata Teleservices have already closed down or are in Insolvency and Bankruptcy Code (IBC).

How this all pans out remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

Moving on to news from the aviation sector, shares of InterGlobe Aviation (IndiGo) plunged up to 10% in intra-day deals today after the airline reported its biggest quarterly loss of Rs 10.6 billion in the September quarter (Q2FY20).

The company had a loss of Rs 6.5 billion in the same period a year ago.

However, the airline reported a higher total income at Rs 85.4 billion, up 31% YoY. Its EBITDAR also rose 16% to Rs 2.6 billion.

Moreover, the airline cut its capacity expansion targets for 2019-20 by 5 percentage points.

The management said, it cut the FY20 capacity expansion target to 25% from 30% due to a 3-4 months delay in aircraft deliveries by Airbus. It maintained capacity growth of 25% for 2020-21.

IndiGo's passenger ticket revenues came in at Rs 71 billion, an increase of 34.4%. Ancillary revenues were reported at Rs 9.3 billion, an increase of 29.8% compared to the same period last year.

Reports state that the country's biggest airline by market share reported a surprise loss on the back of higher maintenance costs and mark-to-market losses.

On an analysts' call, the company's Chief Financial Officer Aditya Pande said maintenance costs spiked as IndiGo was forced to reassess the expense of leasing and maintaining older Airbus A320ceo planes to fill a gap caused by the grounding of newer A320neo aircraft due to engine issues.

IndiGo share price is presently trading down by 9%.

Speaking of quarterly results and corporate profits, economic growth (GDP) and corporate profit growth hardly go hand in hand.

Over the past few years, the share of corporate profits to GDP has steadily declined.

This is evident in the chart below:

Rebound in Corporate Profits May Not Immediately Reflect in GDP

As per Tanushree Banerjee, the revival of capex cycle may cause corporate profits to soar much faster than the GDP growth. Investors who stay focused on macro numbers may miss this bus.

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

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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Indian Share Market Update: Top Gainers and Losers