Stock markets in India are presently trading on a flattish note. Sectoral indices are trading on a mixed note with stocks in the realty sector and metal sector witnessing maximum selling pressure. Telecom stocks are witnessing buying interest.
The BSE Sensex is trading up 12 points (up 0.04%) and the NSE Nifty is trading down 6 points (down 0.1%). The BSE Mid Cap index is trading down by 0.9%, while the BSE Small Cap index is trading down by 1.3%. The rupee is trading at 63.74 to the US dollar.
In the news from the telecom sector, as per an article in the Economic Times, a report by CIEL HR Services has stated that the telecom sector will continue to witness decline in headcounts for the next six to nine months. This will take the job losses in the sector from 80,000 to 90,000 during the same period.
The telecom sector, which has been witnessing low profitability and lower margins due to rising competition, has witnessed large lay-offs and has thus made the job scenario uncertain. As per the news, the report is based on a survey among around 100 senior and mid-level employees of 65 telecom companies and software and hardware service providers to telecom companies.
Note that the whole telecom business has been an underwhelming story so far. Telecom companies are straddled with high debt, intense competition, and lack of pricing power. High spectrum costs and regulatory issues have hampered the sector. While consumers have benefited from low costs and new players fighting for their share, investors have suffered.
Further, with the entry of Reliance Jio, the competition has intensified further. Reliance Jio's low-cost offerings and strategy of capturing market share will further dent the sector. The sector has been a classic ‘value trap'.
While it always looks cheap compared to other sectors, the sector has also failed to provide any reasonable returns. The BSE Sensex has gone up 3.25 times in nine years, but the BSE Telecom Index has not moved an inch from its levels of 2008. This is evident from the chart below:
