Sensex lacklustre; Pharma, Oil & Gas up

Benchmark indices were moving in narrow ranged Friday as investors stood on sidelines ahead of a long weekend. However, buying activity
was seen in midcaps and smallcap stocks.

“Bulls are indeed on seventh heaven as the September series came to a happy close with a 7% gain in the major indices. Foreign funds continue to pour money into Indian equities while the local funds don’t appear to be all that excited. The market is likely to remain sideways with mostly a positive bias and its direction will hinge on FII inflows and external environment. Results and RBI’s monetary policy are the two big events to watch out for next month.

We have two back-to-back extended weekends. This has the potential to make the market choppy but also gives you a chance to relax,” said India Infoline report.

At 12 pm, Bombay Stock Exchange’s Sensex was at 16749.53, down 31.90 points or 0.19 per cent. The index touched an intra-day low of 16618.43 and high of 16787.67.

National Stock Exchange’s Nifty was at 4978.60, down 7.95 points or 0.16 per cent. The broader index touched a low of 4931.25 and high of 4989.50.

“Yesterday's recovery suggests us that the bull strength is still intact however; the recovery above 5020 level is needed to continue the same. On the lower side the level of 4925 may act as a major support for the market and failure to hold the same may invite further sell off in the market. Below 4925 level the index may reach 4870/4880 level. Traders can search for fresh trading long opportunity around these levels,” said Kotak Securities report.

BSE Midcap Index was up 1.21 per cent and BSE Smallcap Index moved 1.53 per cent higher.

Amongst the sectoral indices, BSE Healthcare Index gained 2.68 per cent, BSE Oil&gas Index and BSE Realty Index was up 0.99 per cent each.

BSE IT Index was down 1.29 per cent and BSE Metal Index tripped 0.84 per cent.

TCS (-2.15%), Infosys Technologies (-1.49%), Bharti Airtel (-1.43%), ICICI Bank (-1.30%) and Sterlite Industries (-1.27%) were amongst the Sensex losers.

Gainers included Sun Pharmaceuticals (1.61%), Reliance Industries (1.26%), Maruti Suzuki (1.03%), ONGC (0.70%) and NTPC (0.59%).

Market breadth was positive on the BSE with 1765 advances and 766 declines.

News Source : Sensex lacklustre; Pharma, Oil & Gas up

Bharti fails to keep pace with Sensex on MTN overhang

Bharti Airtel, which has underperformed the benchmark Sensex ever since it revived a plan to merge with South Africa’s MTN Group, may surge if the deal falls through, as it would put an end to uncertainty about the future of a combined entity with differing management styles, structures and some imponderables, investment advisors say.

“If the deal (with MTN) succeeds, there could be a small downside,” said Mehraboon Jamshed Irani, senior vice-president-PMS, FCH Centrum Wealth Managers. “But if it fails, the stock could gain, as those worried about the uncertainty surrounding the deal may want to include Bharti in their portfolio,” Irani added.

Bharti, the biggest mobile phone company with a 4.4% weighting in the benchmark Sensex, is down 2% since May 25 this year, when it announced the reopening of exclusive negotiations with MTN. During the period, the most popular index has risen 20%. Bharti ended 1.4% higher at Rs 419.25. Sunil Mittal, who last year ditched a plan to combine the companies, revived the idea to create a $23-billion behemoth with more than 200 million customers, as he sought to grow globally when the domestic revenues per user were declining due to stiff competition.

But the regulatory hurdles such as mandatory open offer by MTN for 20% of Bharti’s minority holders and legal complications in dual listing are threatening Mittal’s ambitions. Both the companies are still in discussion and the deadline to conclude a deal is September 30. During the downturn in 2008, Bharti figured among the best performing stocks and many investors still like the stock, but for MTN. The stock has underperformed its peers, too, despite many investors preferring it over rivals.

“We like Bharti’s strong management team and its ability to execute consistently. But given the current overhangs, we do not think the stock is cheap at 15.9 times FY11 P/E,” said Nomura in a note to clients. It
has a neutral rating on the stock. “Uncertainty about the MTN deal is one element, but domestic competition concerns, along with 3G and MNP (mobile number portability) impact, are other overhangs.”

Its leadership position and experience make it the best candidate to take on the emerging competition, some analysts say. “In our view, it’s best positioned to manage competitive pressure, given its incumbency advantage and diversified service portfolio,” RBS said in a note to clients. “We believe current valuations, at almost 14 times FY11 EPS, factor in the transaction, thus restricting downside on a formal announcement. Hence, termination of a deal could drive significant upside,” the note added.

There are also some who are betting that a buyer of Bharti will be a winner irrespective of what happens to the deal. “Whichever way the deal goes, it will be favourable for investors from the stock market point of view,” says Amitabh Chakraborty, president (equity) at Religare Securities.

“If the deal goes through, Bharti may find a place in the MSCI index which will result in foreign investors wanting an exposure to the stock. At the same time, domestic investors are not very positive on the stock as they think value accretion may take some time in the event of a successful deal with MTN. If the deal falls through, these fund managers may start buying the stock again,” he said.

News Source : Bharti fails to keep pace with Sensex on MTN overhang