Telecom spectrum auction begins. How to trade Bharti, Idea, RCom?

The licences of Bharti and Vodafone are to expire this year, beginning with Delhi, Mumbai and Kolkata, while Idea’s licences for seven of the nine circles where it is present will expire next year.

The start of the auctioning of the spectrum has seen stocks from this space come under selling pressure today.

Bharti Airtel Idea Cellular and RCom have under-performed the overall market by slipping in the range of 1.3 – 2.5% as compared to 0.4% fall in the benchmark indices – the S&P BSE Sensex and the CNX Nifty.

Kunal Bothra, technical analyst, LKP Securities shares his views on the overall direction for the markets and how should one play the telecom space given the developments.

SmartInvestor : The markets have started the week on a soft note. What's the road ahead and what are the Nifty levels you are keeping on?

Kunal Bothra : Yes, we are following the weakness in the Asian markets. Also our markets are lacking the strength of any key sectoral moves. I believe the 200 DMA is a crucial support, the level is at 5970. The resistance is placed at 6160 for the very short term.

SmartInvestor : Can you give views on Bank of India, REC, Tata Steel?

Kunal Bothra : Bank of India fell sharply and is now reeling below the 200 and 50 DMA. With volumes increasing in this selloff, chances are that the stock could fall towards 180 levels before bouncing back from oversold territory.

Kunal Bothra : REC has seen a short term bottom at 168 levels. Momentum indicators are in oversold territory, so a short term bounce could be due for the stock, till levels of 184.

Kunal Bothra : Tatasteel on the weekly charts is still undergoing the correction phase. I believe long term investors should utilise these dips in building long positions. 200 DMA level for Tatasteel is at 320. At that level it could be a favorable risk reward ratio to start going long in this stock, from a longer term view.

SmartInvestor : Telecom stocks are in news today given the spectrum auction. How do RCom, Bharti Airtel and RCom look on the charts?

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