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Telecom Stocks Outlook for the week – 15 to 18.11.2016

Telecom Stocks Outlook for the week – 15 to 18.11.2016
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The downtrend in stocks of major telecom companies is seen continuing next week on concerns
over eroding profitability in the sector due to competition, and on weak broader sentiment. The
Telecom stocks may go further down by 2-3%, but the recommendation
is to buy on dips.

Bharti Airtel stock is likely to remain neutral and is the top pick among stocks in the sector. In the
broader market, benchmark equity indices yesterday closed at their lowest level in over four
months as investors were worried that a rate hike, if any, by the US Federal Reserve in December
would hit foreign inflows into domestic equities. Prospects of a rate hike by US Federal Reserve in
December may raise concerns and weigh on the stocks in the sector.

Next week, domestic stock indices are seen weak because of uncertainty in the global markets, and
the impact of the government's currency curb move. Competition in the telecom industry, triggered
by new entrant Reliance Jio Infocomm, a subsidiary of Reliance Industries, also continues to put
pressure on margins of operators like Bharti Airtel and Idea Cellular.

Incumbent telecom services companies are facing pricing pressure due to Reliance Jio, which
launched its services on Sep 5 and is offering free data until December. Most companies have cut
their tariff steeply due to the rock- bottom prices that the Reliance arm is offering after the free
services. Speculation that telecom services may be charged at 18% under the goods and services

tax regime, higher than the existing service tax of 15%, is also seen weighing on stocks in the sector.