Vodafone Idea, Airtel shares plunge despite AGR relief; what should investors do?
The market is selling on news and buying on rumours, says Dipan Mehta of Elixir Equities.
Vodafone Idea closed 6.08 per cent down at Rs 6.64, while Bharti Airtel fell 2.52 per cent to Rs 426.25. Both of these companies have been struggling with high debt and huge losses amid brutal competition with Reliance Jio.
Dipan Mehta, Director, Elixir Equities told ETNow that in the telecom space, the market is selling on news and buying on rumours.
“There is too much froth in trading positions in telecom, but at some point it will settle down. One needs to now look at telecom more seriously. Many portfolios do not have telecom as part of their core holdings and that may change going forward,” he said.
Vodafone Idea and Bharti Airtel have rallied up to 150 per cent in the past four days after Finance Minister Nirmala Sitharaman said the government didn’t want any telecom company to shut operations.
“I think the worst is over for telecom. I do not know if Vodafone will really turn out to be a winner, but at least Bharti Airtel can survive the AGR issue and can go from strength to strength. But from an investment perspective the stock has already moved up and I would like to buy it at a correction,” said Mehta.
The government on Thursday allowed Vodafone Idea, Bharti Airtel and Reliance Jio to make the next spectrum payment to the government only in fiscal 2022-23.
Vinod Nair, Head of Research at Geojit Financial Services said, “They did well recently due to increase in service price and in expectation of relaxation in spectrum payment and AGR. Profit booking is rational as AGR relief is not being considered by the government for the time being while payment of spectrum cost has been spread to 2 years. Cash flow continues as a big concern for companies.”
Share of Jio’s parent Reliance Industries were also trading 0.91 per cent down at Rs 1,533 in the morning trade on Thursday.
Commenting on the telecom sector, Astha Jain, Senior Research Analyst at Hem Securities said they like RIL’s telecom arm Reliance Jio in the telecom space as they expect the company to add more users going forward.
“We are bullish on RIL with a price target of Rs 1,600 in the short term and Rs 1,800 in the long term.”
Airtel, Vodafone and Reliance Communications (RCom) recently reported a cumulative loss of over Rs 1 lakh crore for the quarter ended September 30.
RComm posted a loss of Rs 30,142 crore due to provisioning of liabilities after the recent Supreme Court ruling on statutory dues. Likewise, Vodafone Idea and Bharti Airtel also posted record losses of Rs 50,921 crore and Rs 23,045 crore, respectively.