Morgan Stanley on Tuesday downgraded Indian telecom sector to “in-line” from “attractive” citing increased regulatory risks and relatively weaker 3G outlook.
“The regulatory risks prevailing in the industry largely offset the upside from operationally strong performance likely to be delivered in the form of traffic growth and EBITDA growth,” Vinay Jaising and Anirban Roy, analysts at Morgan Stanley, said in a report. “We would advise investors to avoid companies with relatively weak balance sheets.”
Morgan Stanley reduced its rating on Reliance Communications (RComm) to “underweight” from “equalweight” and slashed its price target to Rs 51 from Rs 109. The brokerage also downgraded Idea Cellular to “equalweight” from “overweight” and cut its price target for the stock to Rs 87 from Rs 134.
Morgan Stanley retained its “overweight” rating on Bharti Airtel due to its stronger balance sheet and cash flows, but reduced its price target to Rs 366 from Rs 488 earlier.
