Modi 3.0: Infra, defence, railways, PSU Banks, among key sectors to be in focus if BJP wins Lok Sabha Elections 2024

A consecutive third term for PM Modi with an absolute majority in the lower house of the Parliament is what analysts expect to be beneficial for the Indian economy and the stock markets.

Macro stability is one of the NDA’s key achievements and we expect that to continue, said Seshadri Sen, Head Of Research and Strategist at Emkay Global Financial Services.

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If the present government retains power, Sen expects macroeconomic and financial stability is likely to be prioritized, which he believes is vital for continued macro growth and corporate earnings. 

Secondly, capital expenditure is expected to continue, with roads, railways, affordable housing, and green energy in focus. Third, the government may push domestic manufacturing further. It is also expected to emphasize pharma API and textiles in addition to Autos/EVs and electronics and semiconductors.

“We believe that macro-financial stability and focus on capex, investments and manufacturing should sustain the multi-year bull run in Indian equities,” Sen said. 

Also Read: Stock market at new all-time high; Sensex above 76,500 for the first time, Nifty crosses 23,300

Among sectors to watch out for if the NDA retains power, Sen reiterated his preference for Industrials, Materials and Discretionary over Financials and IT.

“The immediate beneficiaries of a third NDA government are Capital Goods (Railways and Defense), Housing, Tourism, and Aviation. Textiles and Pharma API are probable winners. Valuations, though, are a challenge for some of these sectors. We remain overweight on Industrials, Discretionary, and Materials, whereas Financials and IT are the key underweights,” Sen said.

He also favors Smallcaps and Midcaps (SMIDs) over large caps, and his target for Nifty 50 remains 24,000 for December 2024.

Also Read: Indian Stock Market: Exit polls sentimental positive for capex stocks, says Jefferies

Kotak Institutional Equities expects the ‘new’ government to continue with its economic agenda of development, growth and liberalization and focus on investment-led growth, with the recent large transfer of the RBI surplus enabling it to increase capex versus the interim budget.

“We believe that the government will continue its focus on key areas such as affordable healthcare and housing, energy transition, infrastructure development (defense, railways and roads) and manufacturing. We note that the government has already executed the bulk of the required reforms for incentivizing private investments,” Kotak Equities said in a note.

Also Read: Stocks to buy: 15 stock picks by Motilal Oswal after exit polls

However, the domestic brokerage finds very little value in the market and finds most sectors and stocks overvalued relative to the fair value of the stocks, with the extent of overvaluation increasing in the inverse order of market capitalization, quality and risk.

Meanwhile, Motilal Oswal’s model portfolio remains aligned with the key domestic cyclical themes amid a consistent backdrop of earnings growth. It remains Overweight on Financials, Consumption, Industrials, and Real Estate. Its key preferred investment themes are Industrials, Consumer Discretionary, Real Estate, and PSU Banks.

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Published: 03 Jun 2024, 11:39 AM IST