Telecom stocks gain as government allows 100% FDI

Key benchmark indices edged higher in early trade boosted by government's decision on Tuesday, 16 July 2013, to relax overseas-investment rules for a number of sectors. Index heavyweight and cigarette major ITC hit record high in early trade. Reliance Industries rose in early trade. The S&P BSE Sensex was up 71.83 points or 0.36%, off 46.96 points from the day's high and up 7.42 points from the day's low. The market breadth, indicating the overall health of the market, was strong.

HDFC Bank fell ahead of its Q1 June 2013 results today, 17 July 2013. Telecom stocks rose after FDI in the telecom services sector was increased from 74% to 100%. Shares of Idea Cellular hit 52-week high.

The government on Tuesday, 16 July 2013, eased overseas-investment rules for a number of sectors. The government has allowed 100% foreign direct investment (FDI) in telecom. FDI in the telecom services sector was increased from 74% to 100%, but all investments above 49% will continue to be routed through the FIPB.

FDI in public sector gas refineries, commodity exchanges, power trading, stock exchanges and clearing corporations will be allowed up to 49% under the automatic route as against current routing of investment through FIPB. For petroleum and natural gas, the government has maintained its sectoral cap at 49%.

In defence, 26% FDI through the FIPB route has been maintained for state-of-the-art technologies. The increase in defence FDI will be on a case-to-case basis and will take place after consent from the Cabinet Committee on Security.

In a boost to the power sector, the government has allowed FDI in power exchanges through the automatic route. This means that no FIPB approval will have to be sought. However, it has retained the cap at 49%.

FDI cap for private insurers would be raised to 49% but that would need Parliament's approval. The FDI limit for credit information firms was raised from 49% to 74% --all of it may come through the automatic route, against the requirement for clearance from the Foreign Investment Promotion Board (FIPB) at present.

In single-brand retail, though there is no FDI limit at present, the investment has come only after FIPB clearance. This has been eased to allow up to 49 per cent investment through the automatic route.

The tea sector too had some reason to cheer as the condition of divestment to Indian partners has been deleted.

The government didn't take any decisions on increasing FDI caps in multibrand retail and print and electronic media. Commerce Minister Anand Sharma said that that the government will come out with clarifications related to multibrand retail policy soon.

Foreign institutional investors (FIIs) sold shares worth a net Rs 357.40 crore on Tuesday, 16 July 2013, as per provisional data from the stock exchanges.

At 9:28 IST, the S&P BSE Sensex was up 71.83 points or 0.36% to 19,923.06. The index gained 118.79 points at the day's high of 19,970.02 in early trade. The index rose 64.41 points at the day's low of 19,915.64 in early trade.

The CNX Nifty was up 18.25 points or 0.31% to 5,973.50. The index hit a high of 5,988 in intraday trade. The index hit a low of 5,968.80 in intraday trade.

The market breadth, indicating the overall health of the market, was strong. On BSE, 529 shares gained and 217 shares fell. A total of 23 shares were unchanged.

The total turnover on BSE amounted to Rs 99 crore by 09:20 IST.

Among the 30-share Sensex pack, 27 stocks gained and rest of them declined.

Index heavyweight and cigarette major ITC rose 0.58% to Rs 362.25 after striking a record high of Rs 362.40 in intraday trade today, 17 July 2013. The company announces Q1 results on 25 July 2013.

Index heavyweight Reliance Industries (RIL) rose 0.47% at Rs 905.10.

HDFC Bank fell 1.13% ahead of its Q1 June 2013 results today, 17 July 2013.

JSW Steel shed 0.67%. The company after trading hours on Tuesday, 16 July 2013, said that as a policy it does not respond to speculative stories and market rumours after media reports said that JSW Steel is in talks to purchase a significant stake in Sandur Manganese and Iron Ores to improve its access to iron ore and cut logistics costs. Earlier, Sandur Manganese during trading hours on Tuesday, 16 July 2013, had denied stake sale reports. Neither Sandur Manganese nor its promoters have appointed any investment bankers to scout for a buyer, Sandur Manganese had said.

Sandur Manganese and Iron Ores lost 4.48%.

Telecom stocks rose after FDI in the telecom services sector was increased from 74% to 100%, but all investments above 49% will continue to be routed through the FIPB.

Idea Cellular gained 2.73% to Rs 161.75 after hitting a 52-week high of Rs 163.50 in intraday trade today, 17 July 2013.

Bharti Airtel (up 1.56%), Tata Teleservices (Maharashtra) (up 6.5%), MTNL (up 2.38%) and Reliance Communications (up 2.81%) gained.

Torrent Pharmaceuticals rose 2.51% after the company after trading hours on Tuesday, 16 July 2013, said it has fixed 24 July 2013 record date for 1:1 bonus share issue.

UltraTech Cement shed 0.33% on turning ex-dividend today, 17 July 2013, for dividend of Rs 9 per share for the year ended 31 March 2013 (FY 2013).

Berger Paints India rose 0.89%. The stock turned ex-dividend today, 17 July 2013, for dividend of Rs 1.80 per share for the year ended 31 March 2013 (FY 2013).

Shriram City Union Finance fell 2.26% on turning ex-dividend today, 17 July 2013, for final dividend of Rs 6 per share for the year ended 31 March 2013 (FY 2013).

Tata Communications rose 0.52%. The stock turned ex-dividend today, 17 July 2013, for dividend of Rs 3 per share for the year ended 31 March 2013 (FY 2013).

Asian shares were mostly lower on Wednesday ahead of congressional testimony from Federal Reserve Chairman Ben Bernanke, due later Wednesday and again on Thursday. Key benchmark indices in China, Japan, Taiwan and Singapore were down 0.34% to 0.58%. Key benchmark indices in Hong Kong, South Korea and Indonesia were up 0.23% to 0.81%.

US stocks fell on Tuesday, with Coca-Cola Co. and Goldman Sachs Group Inc. losing ground after their quarterly results, and as investors considered Kansas City Fed President Esther George's comment that the Federal Reserve should pare its bond purchases sooner rather than later.

Federal Reserve Chairman Ben Bernanke kicks off his two-day testimony on monetary policy in Washington today, 17 July 2013. In comments last week, Bernanke had eased concerns that the Fed would quickly unwind its monetary stimulus.

The minutes of the Fed's June meeting released on 10 July 2013 showed that while several members judged that a reduction in asset purchases would likely soon be warranted, many want to see further improvement in the labor market before reducing the central bank's $85 billion-a-month quantitative easing program. The Fed currently buys $85 billion a month in government and mortgage bonds in an effort to keep interest rates low and stimulate economic growth. At a press conference following the June 18-19 meeting, Bernanke said the central bank could start reducing its $85 billion in monthly bond purchases later this year if the economy continues to improve in line with its forecasts.

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