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Benchmark indices are likely to decline next week as investors will book profits as the uncertainty over easing foreign direct investment rules in multi-brand retail is now finished. After the government won the vote in Lok Sabha earlier this week, yesterday the Rajya Sabha also voted in favour of permitting 51% FDI in multi-brand retail. The move did not have a substantial impact on the market as it had already factored in a favourable verdict from the Upper House after the Bahujan Samaj Party on Thursday said it would support the government in the vote. This (approval for FDI in multi-brand retail) has given hope that further reforms will be taken up in the remaining part of the Winter session of the Parliament.
We expect the government to take up further fiscal reforms over the next few days. The developments on the 'fiscal cliff' issue in USA will also be keenly watched and a resolution on the same will be positive for the markets. Next week, the market will look to overseas equities and India's industrial production data for October, due Wednesday, for cues. Stock specific momentum would continue till the Nifty holds above these levels. Among stocks, retail companies' stocks may succumb to profit booking after having risen this week on hope FDI in retail would be approved by both houses.
Information technology stocks may remain subdued in the aftermath of a disappointing 2013 revenue outlook from Cognizant Technology Solutions and on account of a strong rupee. Hexaware Technologies, which slid 9.2% to 96.60 rupees on cutting its Oct-Dec and 2012 revenue guidance, is expected to weaken further to close to 92 rupees. The development has led us to cut our CY12 (2012) revenue/EBITDA/EPS (eanings before interest, tax, depreciation, and amortisation/earnings per share) estimates by 0.9%/7.1%/6.8%, respectively and CY13 (2013) revenue/EBITDA/EPS estimates by 4.7%/18.7%/17.7%, respectively. It is also likely to impact cash flow and we expect the IT firm to cut dividend payout for CY13E from 44% to 30%.
