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.
