Telecom companies are expected to underperform in the stock market owing to regulatory issues, a leading brokerage house has said in a report to its clients.Emkay Share and Stock Brokers said that over the last couple of months, there has been a lot of disturbance in the telecom sector due to the regulatory issues on spectrum allocation, resulting in the gross under performance of the telecom shares.
"The sector would continue to under perform the broad markets due to the regulatory uncertainties, till the time the spectrum issues are resolved," the brokerage house said.
The current valuations of telecom firms provide attractive investment opportunity in the sector, but the brokerage house does not expect buying to emerge in the sector till the regulatory issues are sorted out.
The report said whichever way the regulatory authority acts, there will be entry of few new players in the industry. However, it may not materially impact companies like Bharti, Reliance Communications [Get Quote] and Idea.
"Although we expect underperformance of the sector in the short-term due to the regulatory overhang, the robust subscriber additions and strong earnings visibility reinforce our long-term positive view on the sector," the report said.
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