Mumbai: The BSE Sensex rose 0.2% on Thursday, helped by Reliance Industries after its bonus issue plan, but telecom Bharti Airtel and Reliance Communications fell on profitability concerns.
Telecom shares have slumped about a fifth this week on worries falling tariffs and increased competition will squeeze profit margins of the sector.
Macquarie Securities downgraded the sector outlook on Wednesday to underweight, and recommended investors to avoid Indian telecoms.
Shares in leading outsourcers Tata Consultancy Services and Infosys Technologies, which get more than half their revenue from North America, extended losses as the rupee climbed to its highest in more than year.
Analysts said investors were wary ahead of Infosys’ quarterly results on Friday, when the software bellwether would also give its forecast for the full year.
Annual inflation unexpectedly dipped in late September despite firm food prices, giving a respite to bonds and complicating the timeline for the central bank’s planned exit from its easy money stance.
The widely watched wholesale price index rose by 0.7% in the 12 months to 26 Sept, below both market forecasts and the previous week’s 0.83% annual rise.
The 30-share BSE index closed up 0.22%, or 36.88 points, at 16,843.54. It swung widely, rising 1.1% early and then falling as much as 0.2%. Twenty-two of its stocks gained.
Reliance, which has the heaviest weight on the main index, ended up nearly 1% at Rs2,119.20 after rising as much as 5.2% during trade following a surprise one-for-one bonus announcement after market hours on Wednesday.
Traders said concerns about falling refining margins and a pending legal dispute trimmed the rise.
Goldman Sachs said it maintained a ‘buy’ on the stock with a 12-month target price of Rs2,620.
“Investors are sceptical about the outcome of the court case and some have also expressed concerns about the company’s refining margins,” Deven Choksey, managing director and CEO of K R Choksey Shares, said.
Bharti, which called off talks for a proposed-tie up with South Africa’s MTN last month, fell for the fourth straight session taking its losses this week to over 23%.
It closed 6.6% lower at Rs334.65 after hitting 331.25, which was its lowest in nearly six months.
Reliance Communications shed 6% to Rs246.30.
“We maintain our cautious view on the sector and expect war cries as regards intensifying competition and lower tariffs to get louder,” ICICI Securities said.
Tata Consultancy dropped 3.4% to Rs573.05 and Infosys shed 1.8% to Rs2,211.25.
Auto stocks rose on expectations for strong second-quarter earnings. Top vehicles maker Tata Motors raced 5.35% while Mahindra and Mahindra and Hero Honda rose 2.1% and 1.75% respectively.
Larsen & Toubro closed 1.65% lower at Rs1,649.80, after the engineering and construction firm said it raised $600 million through a sale of shares and convertible debentures.
The benchmark BSE index has risen about three-quarters this year, helped by foreign portfolio inflows of $12.7 billion, and analysts say the rally has made stocks pricey.
In the broader market, losers outpaced gainers in the ratio of 1.2:1 on relatively heavy volume of 529 million shares.
The 50-share NSE index closed up 0.3% at 5,002.25.