The outcome of a meeting between officials of the government and the Securities and Exchange Board of India on today (Saturday) will set the tone for Indian equities early next week. In a bid to boost flows into equities, the government and the SEBI are likely to announce some investor-friendly steps. Lower transaction costs and easing collateral norms for foreign institutional investors are some of the measures that may be considered in the meeting. The market regulator is also expected to look at reducing the timeline for initial public offerings to seven days from the current 12 days. Any positive announcements would be a welcome move and could take indices higher, but profit booking at every rise after the recent rally is not ruled out. Later in the week, the Street will take cues from Jul-Sep earnings and industrial production data for August. IndusInd Bank will report quarterly earnings on Wednesday, and Infosys and HDFC Bank on Oct 12. India's 2QFY13 (Jul-Sep) earnings growth should be steady +10% YoY (Sensex ex-oil), largely in line with the last four quarters earnings trajectory. But, this steady earnings growth should not be the driver or a justifier of a decidedly more buoyant equity market.
The overall bias remains positive amid the government's continued efforts to boost investor sentiment by announcing a slew of key reforms and the strengthening rupee against the dollar. We believe investors looking to play the beta rally should increase exposure in banks, real estate and select infrastructure names and trim positions in IT services and pharma (on recent strong performance and expected rupee appreciation). We expect National Stock Exchange's 50-share Nifty to find strong support at 5700. However, even if the index breaches this level, we recommend buying on dips. Yesterday, the Nifty ended at 5746.95, down 40.65 points or 0.7% from Thursday after touching a low of 4888.20 points and a high of 5815.35, intraday. The BSE's 30-stock Sensex closed at 18938.46, down 119.69 points or 0.6%. Intraday, the index touched a low of 18757.34 and a high of 19137.29.
