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Informist, Friday, Dec. 20, 2024

MUMBAI – The US Federal Reserve's latest signals of fewer than anticipated rate cuts in 2025 may continue to weigh on investor sentiment, and drag the Indian equity market down next week, analysts said. Along with the benchmark indices, shares of telecommunication companies are also likely to decline, at least for a few more sessions, they said.

Shares of index heavyweight Bharti Airtel fell over 6% this week, slightly more than the near-5% fall registered by both domestic benchmark indices in the same duration. Shares of Reliance Industries, parent of Reliance Jio Infocomm, fell over 5% this week, while those of Vodafone Idea fell over 7%.

Analysts said this sell-off was triggered by the US Fed's hawkish comments and aggravated by sales by foreign institutional investors and worries about expensive valuations across most sectors in the Indian equity market. Additionally, investor sentiment towards most telecom stocks has been rather bearish of late due to worries about tight competition and loss of subscribers, among others. Telecom stocks may, therefore, continue to take a beating as long as there is an overall weakness in the market, analysts said.

Major telecom operators Reliance Industries and Bharti Airtel have been losing subscribers since June, when both companies clocked their highest subscriber base, till September, according to data from the Telecom Regulatory Authority of India. On the other hand, government-owned Bharat Sanchar Nigam has added users for three months since June, when it hit its lowest subscriber count since April 2020.

Meanwhile, the effect of recent tariff hikes on the addition of subscribers for companies needs to be seen, market watchers said. With the recent announcement of tariff hikes in the range of 15-25%, companies are well placed to see strong growth in average revenue per user, in turn supporting earnings growth for the next few years, Tata Mutual Fund said in a report. On valuations, Reliance Jio is already factoring in the value of services beyond telecom to some extent, whereas Bharti Airtel's India business is being valued above its long-term average in anticipation of future tariff hikes and declining competitive intensity, according to the report.

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Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

Reported by Alina Geogy

Edited by Avishek Dutta

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