Foreign investors, seems to be quite bullish on domestic telecom companies like MTNL and Bharti, despite the fact the government is unlikely to heed the clamour to raise the FDI cap to 74 per cent. Telecom stocks came under heavy selling pressure on reports that the new government may not raise foreign holding limit in the telecom sector.

The Left Front is keen on channelling foreign capital in selective industries only, and telecom is unlikely to be one of them. The 49 per cent limit will be a negative for private sector players like Bharti (and Hutchison), who would have otherwise relied on foreign capital, to an extent, for their expansion and acquisition plans.

Moreover, with the Congress following a policy of 'selective privatisation' the likelihood of MTNL (and BSNL) divestment is unlikely to go forward. Additionally, a softer stance on labour reforms would mean that VRS proposals are likely to be shelved.

But leading foreign broking firms like J P Morgan are still bullish on telecom stocks like MTNL and Bharti. The prevalent mood among Morgan's analysts is that "this fall in the stock price provides a great buying opportunity for investors." But the brokering firm said that the foreign limit remaining at 49 per cent would certainly reduce the ability of Bharti to raise foreign capital.

However, the company is fully funded for its expansion plans in FY05. Additionally, the net debt to funded equity is below 0.8, which means Bharti can raise capital through the debt route. Since there is confidence in wireless growth in India and they believe that Bharti is among the best positioned to capture the benefits of this explosion.

The focus area of the new government is likely be on increasing rural incomes, which will boost the growth for wireless services over the long term, since the growth in metros has fallen behind the non-metro circles, and rural growth will be a strong positive over the longer term.

In the case of MTNL, though privatisation will be on the backburner, VRS may be implemented, as it is the MTNL board which will decide on it and not the government.

Also, MTNL has been partially able to stem the migration of subscribers to private fixed operators.

Tariffs have now stabilised and are unlikely to fall further. To add to stability in fixed-line business, the wireless business is showing traction for the first time. The company is adding around 1.6 million capacity in three phases, which will give a leg up to the wireless business.