Friday, 22 December 2017

Sensex Trades in Green; TCS Up 2.5%

After opening the day on a positive note, Indian share markets have continued the momentum and are currently trading in green. Sectoral indices are trading on a mixed note, with stocks in the IT sector and stocks in the power sector witnessing maximum buying interest. While stocks in the consumer durables sector are trading in red.
The BSE Sensex is trading up 175 points (up 0.5%) and the NSE Nifty is trading up 50 points (up 0.5%). Meanwhile, the BSE Mid Cap index is trading up by 1%, while the BSE Small Cap index is trading up by 1.1%. The rupee is trading at 64.04 to the US$.
In news from stocks in the IT sectorTCS share price is among the top gainers on the bourses today after the company won a record outsourcing contract.
India's leading IT exporter Tata Consultancy Services bagged a US$ 2.25-billion outsourcing contract from Nielsen, a television rating measurement firm.
The partnership, signed in October this year, is a renewal of TCS' existing collaboration with Nielsen. The two companies had struck a 10-year deal in 2008 for US$ 1.2 billion, which was expanded to US$ 2.5 billion in 2013.
Under the new deal, the terms of the agreement have been extended for an additional five years so as to expire on December 31, 2025, with three one-year renewal options granted to Nielsen, the TV rating company said in a regulatory filing to the US SEC.
The latest deal brings cheer to the Mumbai-based IT behemoth as it assures US$ 320 million worth of business annually in the 2017-2020 period.
At the time of writing, TCS share price was trading up by 2.5%
Underperformance of Top IT Stocks
The IT sector was much favored amongst investors since the turn of the decade. IT giants like TCS, Infosys were considered a safe bet at any price. In the last three years,t he top 4 IT companies have underperformed the benchmark. With the sector heavily dependent on US customers, Trump's protectionist policy announcements have further dampened the mood in this sector.
Also, with automation on the horizon, Indian IT companies' low-cost labor outsourcing is turning into a thing of the past. IT companies need to re-invent itself.
Automation is needed in their traditional businesses like BPO, application management, and infrastructure management.
While near term challenges are there, current valuations of top IT companies are at multi-year lows. But is this the new normal? The challenge is to find the companies better placed than others to adapt to this structural change.
Moving on to news from stocks in the telecom sectorBharti Airtel share price is in focus today after the Unique Identification Authority of India (UIDAI) conditionally allowed the company to conduct Aadhaar-based e-KYC verification for mobile subscribers till January 10, 2018.
This has been done to facilitate linking of Aadhaar with mobile SIMs, the new deadline for which is 31 March, in line with the Supreme Court's directive.
However, the suspension of the e-KYC licence of Airtel Payments Bank has not been revoked.
UIDAI has asked Reserve Bank of India (RBI), Department of Telecom (DoT) and audit and consultancy firm PricewaterhouseCoopers India to conduct an audit of Bharti Airtel with respect to its systems, processes, applications, documentations and any other aspect as may be identified by RBI and DoT to ensure that the company is in compliance with its licence conditions.
The decision to provide a temporary reprieve to Airtel was taken after Rs 1.3 billion of funds under the direct benefit transfer scheme were credited back to the original accounts of 5.5 million beneficiaries.
UIDAI last week had temporarily suspended Airtel and its payments bank from conducting Aadhaar-based verification of its mobile customers as well as those of the bank using the e-KYC process. And asked the company to deposit Rs 250 million as penalty with UIDAI.
At the time of writing, Bharti Airtel share price was trading up by 1.5%
This article was originally published in English at www.equitymaster.com
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