With the minor rally over, the next support for the Sensex is between 16300-16,100
The market traded range-bound throughout the day and ended with modest gains on Thursday. The Sensex ended the day at 16,519, higher by 111 points (0.7%) while the Nifty closed at 4,947, higher by 28 points (0.6%). The bourses pared early gains soon and traded in a narrow range till afternoon. The market rebounded in the afternoon session on strong European markets and touched its intraday high. However, it came down from that level to trade in a narrow range for the rest of the trading session.
Asian stocks were down on Thursday as concerns over the fiscal deficit in the eurozone weighed down sentiment. Investors remain jittery after Germany's decision late on Tuesday to ban naked short-selling in sovereign debt and some financial stocks. Key benchmark indices in China, Indonesia, Singapore, Japan, Hong Kong, South Korea and Taiwan fell by 0.17% to 1.83%.
US markets were down on Wednesday on concerns over Germany's unilateral action to ban specific trades in some stocks and bonds. Germany’s move appeared to catch its partners in the European Union off-guard. The Dow was down 66 points (0.6%) to 10,444. The S&P 500 was down 5.7 points (0.5%) to 1,115. The Nasdaq was down 19 points (0.8%) to 2,298.
Back home, food price inflation picked up marginally for the second consecutive week in early May. It was up 16.49%, higher than the previous week’s reading of 16.44%. The fuel price index was steady at 12.33%, while the primary articles index was up 16.19% versus 16.76%.
The Reserve Bank of India (RBI) said that the Greece debt crisis may have an impact on India’s trade. Foreign Institutional Investors (FIIs) were net sellers of Rs1,383 crore. Domestic Institutional Investors (DIIs) were net buyers of Rs56 crore. The rupee was down on the dollar’s gain against other major global currencies despite a gain in the equity market.
Kale Consultants (down 0.9%) has announced the introduction of a rate shopping tool, Travel Shop. This tool empowers travel agencies to benchmark their own rates against those of competitors on various days or periods in the future and gives a quick insight over how the market and competitors are behaving and accordingly assists to set their rates.
Reliance Industries (RIL) (up 0.1%) has suspended drilling operations in the east coast because of the threat of Cyclone Laila. The rigs operating in its contract areas were moved to safe zones. Nissan Copper (up 3.2%) has concluded placement of 5,000,000 Global Depository Receipts (GDRs) at $4.48 per GDR (representing 25,000,000 equity shares of Rs10 each). The board has also approved and allotted 5,000,000 GDRs and 25,000,000 underlying shares of Rs10 each representing the GDR. Tata Teleservices Maharashtra (TTML) (up 0.7%) has won the bid for 3G spectrum in the Circle A of Maharashtra with a bid value of Rs1,257.82 crore. The win in Maharashtra (and Goa) gives TTML access to the 3G spectrum for the next 20 years and will help the company consolidate its market share in this region which has a very high potential.
Jindal Steel & Power (up 1.2%), through its 100% subsidiary Jindal Steel & Power (Mauritius) Ltd has agreed to acquire Oman-based Shadeed Iron & Steel Co LLC for a consideration of $464 million, including the assumption of liabilities of up to $79 million by executing a definitive share purchase agreement.
It is quite likely that there will be an employment freeze in the telecom industry, as players face growing debt and a broken business model
Many upcoming sectors in India were touted as sources which would provide employment opportunities to vast numbers. Among the emerging sectors, first it was media, then retail and later telecom. Both the media and retail sectors have failed to live up to their promise. Now it is the turn of telecom, which was perceived to be a booming sector.
The business model of telecom is badly broken. What would be the impact on employment due to the recent developments in the industry, since the telecom sector is among the largest employers? Idea might be raising a debt of Rs4,500 crore; Reliance Communications might raise further debt of Rs6,500 crore; Bharti Airtel will also require additional funding of around Rs8,000 crore. Private players are taking on increasing amounts of debt to fund their 3G rollouts and to fuel their expansion plans. Ergo, they will have no choice left now but to cut costs—and freeze recruitment.
An official from Reliance Communications who wished anonymity told Moneylife, “Per-person productivity will become extremely important and we are trying to adjust (the work schedules of) our employees. The most probable situation would be that one person will have to take over the work done by four people.”
Telecom players may take a further hit due to lower tariffs arising out of cutthroat competition and churning of subscribers due to the soon-to-be-introduced mobile number portability (MNP) regime. For cost-cutting, players might fall back on outsourcing of human resources functions and crack down on recruitment. Any large telecom player who does not have a significant presence in a particular circle will further bring down tariffs, which will only exacerbate cost-cutting measures among all the players—further worsening the employment scenario.
When Moneylife contacted telecom players like Airtel, Idea and Vodafone, they refused to comment on any questions related to future employment trends.
An analyst from Ambit said, “High debt will be an issue for these companies and not employment concerns as this is a positive sector. Telecom companies will have to arrange for additional funding for cash outflow required for 3G as the cash in hand will not be sufficient. Plus they will require additional cash for other expenditures as well.”
Market analysts are worried that earnings might be impacted due to the increase in interest expenses with the 3G rollout. Most of them remain negative on telecom companies.
Ambit’s report released today says: “The pan-India auction amount reached Rs167.5 billion ($3.7 billion), up 379% over the base price of Rs35 billion. With this, the Indian government will raise Rs677 billion ($15 billion). Apart from the payment for spectrum, operators would also need to pay for 3G capital expenditure, which will increase the debt burden. We expect RCom’s debt burden to go up by about 26% whereas Idea’s debt burden would go up by 57%.”
All this means that when the axe is going to be wielded for cost-cutting measures, it is surely going to fall on telecom employees.
The market regulator has appointed Ananta Barua and Dr Pradnya Saravade as executive directors
Market regulator Securities and Exchange Board of India (SEBI) has appointed Ananta Barua and Dr Pradnya Saravade as executive directors. Both Mr Barua and Dr Saravade took charge on Thursday.
Earlier, Mr Barua was working as legal adviser in the legal affairs department (LAD) at SEBI. He has been working in LAD since 1992 and has assisted the Board in framing of regulations.
Mr Barua was also active in various committees including working as Technical Member of the Committee on Financial Sector Assessment, Justice Wadhwa Committee on re-allocation of IPO proceeds among various other committees. He also assisted Justice Bhagwati on takeovers and the Justice Dhanuka Committee on Securities Laws.
Dr Saravade is from the 1989 batch of the Indian Police Service (IPS) and has served in the states of West Bengal and Maharashtra and the Central Bureau of Investigation (CBI). She has been on deputation with SEBI since July 2008 and has been holding charge of Investigations Department in SEBI. As executive director, she will continue to head the Investigations Department of SEBI, the market regulator said in a release.