Morgan Stanley downgrades India’s telecom sector

Mumbai: Morgan Stanley has downgraded its view on India’s telecom sector to “in-line” from “attractive”, citing increased regulatory risks tied to the spectrum auction, and “relatively weaker” 3G outlook.

The brokerage has cut its rating on Reliance Communications to “underweight” from “equalweight”, and slashed its target price to Rs51 from Rs109, citing a weaker balance sheet and saying the company faced the highest regulatory risk.

Morgan Stanley has also cut Idea Cellular to “equalweight” from “overweight”, while reducing its target price to Rs87 from Rs134, citing its smaller balance sheet and a 32% outperformance in the last twelve months.

Bharti Airtel remains the only “overweight”-rated stock in Morgan Stanley’s telecom coverage, with a target price of Rs366, down from Rs488 earlier.

Shares in Bharti Airtel were down 0.5% to Rs301, Idea Cellular down 0.9% to Rs78.50, while Reliance Communications fell 1.3% to Rs66.55.

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