The stock market is still betting on telecom players because it expects a revival in the sector, says Raamdeo Agrawal, Chairman of Motilal Oswal Financial Services.
The Dalal Street veteran said both the operators and the government are going to make money from telecom in next five years.
He said telecom has been a story of disaster for last 13 years, as the number of players in the industry went up from three to 17 and then came back to three again. “The telecom sector is going through a flux with respect to cost issues and competition,” he said.
Balance sheets of the telecom majors are in a bad shape, as they deal with the Supreme Court ruling on adjusted gross revenue (AGR), which widened the scope of calculating the same and burdened the incumbents with a whopping Rs 1.33 lakh crore statutory dues to be paid by January.
Following the order, Bharti Airtel and Vodafone Idea posted record losses, as they had to set aside funds towards the dues. They, meanwhile, have appealed to the apex court to review its decision. Both telcos said their businesses may not sustain in case there was no support from the government.
Agarwal said he firmly believes the economy would soon recover from the current slowdown. “The slowdown is repairable. It may take 6-8 months,” he said.
India reported the lowest growth in 26 quarters for July-September period at 4.5 percent. Nomura recently said the growth rate may plunge further as it hasn’t bottomed out yet.
Ramesh Damani, Member, BSE and another Dalal Street veteran, said he did not think India can be defined by 30 companies that are present in the Sensex.
Lately, there has been a lot of talk on benchmark indices not representing the true picture of Indian economy, as there has been a major divergence between the performance of Sensex or Nifty that are at record highs and the state of the economy.
Damani, who is also a value investor, said he lost a lot of money in MTNL which he had bought at the time of telecom boom in 1995. Damani, however, said he had enough winning stocks to compensate for the losses.
He said he has suffered some setbacks in the current market. “I can’t say I have a pristine portfolio through this bear market,” Damani said.
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