Bank of America Merrill Lynch has upgraded mobile carriers Bharti Airtel and Idea to "buy" from "neutral" on the back of positive outcome of the 2G auction.
Three factors should drive stock upside, BofA-ML said.
1) Deep (20-40 per cent) underperformance over last 12-months;
2) Policy decisions in areas like spectrum pricing could be favorable hereon (unlikely to get worse at least) leading to potentially lower cash outflow from operators, and
BofA has raised the target price on Bharti to Rs 340 and Idea to Rs 105.
"In the medium term, two policy changes look likely: (1) reserve prices for the four not-bid circles could be lowered - Bharti is market leader in most of these circles; (2) benchmarking of future auctions (eg. 900MHz) to the recent one will likely be careful; this may lower re-farming outgo, though higher 1,800MHz availability makes re-farming likely," BofA-ML said in a note.