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The outcome of US President Barack Obama's meeting yesterday with congressional leaders to discuss ways the country can avoid the so-called fiscal cliff will set the tone for trading in domestic equities next week. The fiscal cliff refers to tax hikes and spending cuts the US government will have to undertake from January to increase its revenues and lower its debt. US index futures slipped yesterday before Obama's meeting with the Republican and Democratic leaders of the Congress. Caution due to the looming fiscal cliff led to a sell off in Indian equities yesterday, with the benchmark Nifty index ending below its key support of 5600 for the first time in 12 days. On a week-on-week basis, the two indices were down nearly 2% each. A Close below Nifty's support level could put further pressure on the broader market in the next one-two sessions. However, they see a recovery from 5530-5550 on the Nifty. Stiff resistance for the index is seen at 5650.
Apart from overseas woes, profit booking post a weak-to-uneventful Jul-Sep earnings season could weigh on Indian equities in the coming sessions. 2QFY13 (Jul-Sep) results raised several uncomfortable questions about (1) PSU (public sector undertaking) banks' NPLs, (non-performing loans) (2) high multiples of certain consumer stocks in light of middling quality of earnings, (3) disclosures and (4) the market's expectations of earnings upgrades. As can be seen, our earnings forecast has declined moderately for FY2013 and we now forecast 5.8% growth in net profits of the BSE-30 index (full-float basis) versus 7.5% at the start of the 2QFY13 results season. Among stocks, Siemens, Geodesic, and Mudra Lifestyle will be in focus next week as the companies will release their Jul-Sep results.
Bharti Airtel's stocks, which have risen 9% in the past four sessions, could see profit booking next week. The stock ended up 3.8% at 301.40 rupees yesterday that a lack of participation by companies in the 2G-spectrum auction for the 1,800 MHz band may could force the government to keep a lower reserve price for future auctions.
