After opening the day in green, share markets in India have continued the momentum and are presently trading above the dotted line. Sectoral indices are trading mixed with stocks in the energy sector and stocks in the PSU sector trading in red. While stocks in the realty sector are trading in green.
The BSE Sensex is up by 130 points (up 0.4%) and the NSE Nifty is trading up by 31 points (up 0.3%). Meanwhile, the BSE Mid Cap index is trading up by 0.5%, while the BSE Small Cap index is trading up by 0.7%. The rupee is trading at 63.35 to the US$.
In news from stocks in the telecom sector. Bharti Airtel share price is among to top gainers on the markets today after entering in to a strategic partnership with Samsung Mobiles.
India's largest telecom company, announced a strategic alliance to bring a range of affordable 4G smartphone options to customers.
As a part of this alliance, four top models from Samsung's popular Galaxy J-series range will be available with attractive cashback offers, bringing down the effective price of the device and making them highly affordable for customers.
Telecom operators are coming up with such offers with an aim to capture smartphone users in the country as they consume more data compared to feature phone users. As per a CLSA report, Reliance Jio has already captured 80 per cent of smartphone users in the country. The company had 139 million subscribers in September while smartphone customer base stood at around 178 million in the same month.
At the time of writing, Bharti Airtel share price was trading up by 3%.
Telecom Sector: A decade of Underperformance
The whole telecom business has been an underwhelming story so far. While the telecom subscriber base has increased from 300 million in 2008 to 1.2 billion in 2017, investors have little to cheer. The BSE Sensex has gone up 3.25 times in nine years, but the BSE Telecom Index has not moved an inch from its levels of 2008.
Telecom companies are straddled with high debt, intense competition, and lack of pricing power. High spectrum costs and regulatory issues have hampered the sector. While consumers have benefited from low costs and new players fighting for their share, investors have suffered.
With the entry of Reliance Jio, the competition has intensified further. Reliance Jio's low cost offerings and strategy of capturing market share will further dent the sector. The sector has been a classic 'value trap'. While it always looks cheap compared to other sectors, it has failed to provide any reasonable returns. We also believe the situation is unlikely to change in the near future. For an investor, it's important to differentiate between 'value' and 'value traps'.
Moving on to news from engineering stocks. L&T share price is in focus today after the company's wholly owned subsidiary, L&T Hydrocarbon Engineering bagged a lucrative order.
The company secured a Rs 14.8 billion offshore contract from ONGC, for the Bassein Development 3 Well Platform and Pipeline Project.
The project, part of ONGC's strategy to jointly develop three small and marginal fields/blocks under 'Bassein Development 3 Well Platform and Pipeline Project', is scheduled to be completed by May 2019.
The contract covers engineering, procurement, construction, installation and commissioning for the project.
With the development, L&T share price hit a 52-week high, however dropping soon after. At the time of writing, L&T share price was trading lower by 0.2%.
This article was originally published in English at www.equitymaster.com
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