Domestic indices remain lower in late morning deals

Domestic equity indices remained in red and were trading with cut of around 0.35% each in late morning deals on weaker global cues, as caution prevailed across markets ahead of the U.S. Federal Reserve's rate decision later in the day. The Fed is widely expected to raise interest rates by 25 basis points. Meanwhile, traders await more of financial results from India Inc for domestic cues, with Titan and Godrej Properties among others due to post their earnings later in the day. However, broader indices on the BSE were trading higher in the range of 0.40-0.45%. There were some buzz in Sugar industry stocks with a private report stating that cooperative sugar factories have written to Prime Minister Narendra Modi seeking to increase the minimum sale price (MSP) of sugar to improve their cash flows that would make clearing sugarcane dues to growers convenient.

On the global front, Asian markets were trading lower following weak cues from the US markets overnight. Back home, on the sectoral front, traders were seen pilling up position in FMCG, Realty, PSU, Utilities and Power, while selling was witnessed in TECK, IT, Metal, Telecom, Oil & Gas. 

The BSE Sensex is currently trading at 61144.49, down by 210.22 points or 0.34% after trading in a range of 61024.44 and 61274.96. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.40%, while Small cap index up by 0.43%.

The top gaining sectoral indices on the BSE were FMCG up by 0.82%, Realty up by 0.74%, PSU up by 0.19%, Utilities up by 0.16% and Power up by 0.13%, while TECK down by 0.75%, IT down by 0.71%, Metal down by 0.69%, Telecom down by 0.67% and Oil & Gas down by 0.38% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 1.17%, Hindustan Unilever up by 1.16%, Ultratech Cement up by 0.73%, ITC up by 0.73% and Nestle up by 0.41%. On the flip side, Larsen & Toubro down by 1.27%, Axis Bank down by 1.22%, Bajaj Finance down by 1.10%, TCS down by 0.96% and Bharti Airtel down by 0.90% were the top losers.

Meanwhile, Credit Rating Agency ICRA has revised the outlook on the telecom tower industry to Negative from Stable, as the industry has been facing headwinds in the form of elongated receivables, on account of delays in payments by some of the telecom service providers. As per ICRA, the gross receivable days are likely to remain above the ICRA’s outlook revision threshold of 80 days. The stretch in the working capital cycle resulted in moderation in the liquidity profile of the telecom tower industry and increased the reliance on external debt, which, coupled with the provisions for doubtful receivables, is likely to weigh down on the return metrics of the industry.

According to the report, while the network expansion and technology upgrades point towards steady growth in the infrastructure-provider business, the tower industry will not be immune to liquidity pressures faced by a few telcos. Meanwhile, several payments between the weaker telcos and tower companies remained unfulfilled and thus pressures continued to mount on the working capital cycle of the latter. ICRA expects revenue growth of the tower companies to remain low at 3-4% with operating margins (adjusting for energy revenues) at around 60% going forward (lower than 75-77% in the past). These, along with elevated working capital requirements, resulted in moderation in the cash balances of the industry to around Rs 2500-3000 crore, from Rs 6500-7000 crore levels in the past.

The report further said the demand for telecom services, especially data, witnessed strong growth in the past, translating into consistent network expansion and upgradation by the telcos. This kept the demand for tower companies buoyant, resulting in steady addition in tenancies. The tenancy ratio has largely stabilized and is likely to remain at around 1.2-1.3 times in the medium term. Nevertheless, the tower industry’s dependence on weaker telcos in terms of tenancies remains high at around 34%. Thus, till the time there are liquidity pressures on such customers, the tower industry’s health is likely to remain affected.

The CNX Nifty is currently trading at 18083.45, down by 64.20 points or 0.35% after trading in a range of 18050.60 and 18116.35. There were 20 stocks advancing against 30 stocks declining on the index.

The top gainers on Nifty were Asian Paints up by 1.15%, Hindustan Unilever up by 1.14%, Divi's Lab up by 0.75%, Ultratech Cement up by 0.72% and ITC up by 0.71%. On the flip side, Hindalco down by 1.80%, ONGC down by 1.49%, Larsen & Toubro down by 1.36%, Bajaj Auto down by 1.33% and HDFC Life Insurance down by 1.19% were the top losers.

Asian markets were trading in red; Taiwan Weighted lost 68.19 points or 0.44% to 15,568.29, Hang Seng declined 362.1 points or 1.82% to 19,571.71, KOSPI dropped 25.19 points or 1% to 2,499.20, Jakarta Composite plunged 77.03 points or 1.14% to 6,786.27 and Straits Times fell 25.26 points or 0.77% to 3,256.73.