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Select telecom stocks such as Bharti Airtel Ltd and Reliance Communications Ltd are expected to trade in the green next week as foreign institutional investors have raised their exposure to them. Post the announcement of the Budget for the financial year 2013-14 (Apr-Mar), both Bharti Airtel and Reliance Communications have seen increase in FII inflows. Though positive, they are expected to be rangebound. We upgraded Bharti and Idea and the Indian telecom industry. Bharti Airtel looks attractive on account of stronger cash flows, attractive valuation and recent underperformance. Failure of the government to receive applications from companies for participating in auction of spectrum in the 900 Mhz bandwidth, implies lesser spectrum-related payout. The auction was scheduled to start Monday. Incumbent players such as Bharti Airtel and Vodafone India have vociferously opposed the high base price set for the 900 Mhz spectrum auction. After the inability of the government to conduct the auction, it is expected that the base price for the 900 Mhz bandwidth would be reduced. The government has set a base price of 9.70 bln rupees for a block of 1.25 Mhz in Delhi, 2.27 bln rupees for Kolkata and 9.49 bln rupees for Mumbai circle in the 900 Mhz bandwidth.
