As the country enters the final phase of elections on June 1, 2024, brokerage firm PhillipCapital said in the base case scenario that there could be a sharp rise in stock prices if the BJP gets 290-300 seats and the NDA alliance wins 330-340 seats.
“An optimistic scenario of 325+ BJP and 360+ NDA members – this should lead to a sharp rise in stock prices. A pessimistic scenario – where the BJP fails to win a majority but the NDA forms a government led by Narendra Modi as Prime Minister – could lead to a sharp sell-off in stock prices,” the report said.
The brokerage advises “buying stocks on a sharp correction” assuming a stable alliance for the next five years under Modi's leadership. “We see no chance of a government coming to power without the NDA,” the brokerage adds.
If the NDA comes to power, PhillipCapital remains bullish on sectors such as automation, electric vehicles, defense, railways, logistics, ports, roads, real estate, metals, cement, energy and financials. “From a long-term and structural perspective, we continue to prefer cyclicals over the consumer space (this thesis has been valid for over 2.5 years).”
According to PhillipCapital, its top picks with a one-year perspective include SBI, BOB, Canara Bk, PFC, REC, Shriram Finance, Muthoot Finance, UltraTech, Siemens, Hero MotoCorp, TVS Motor, Divi's Labs, Syngene, APL Apollo, Jindal SAW, IGL, Aarti Industries, Vinati Organics, Praj, Gokaldas Export (NR) and SP Apparel (NR).
Those with a 2-3 year perspective are HDFC Bank, ICICI Bank, SBI, Kotak Bank, Bajaj Finance, Sundaram Finance (NR), MAS Financial (NR), Infosys, HCL Tech, Persistent, KPIT Tech, Rategain, Reliance (NR), GAIL, Ambuja Cements, JK Cement, L&T, Bharti (NR), Sun Pharma, Divi's Labs, Syngene, Coal India (NR), JSW Steel, Jindal Stainless, Maruti, Bharat Forge, Ashok Leyland, Concor, NCC, PNC Infra, Gateway Distriparks, SRF, Aarti Industries, Navin Flourine, PI Industries, Coromandel, Dhanuka Agritech.
The brokerage says voter turnout is not a real concern as the “average turnout” based on the simple average of turnout data released up to Phase 6 is lower at 65.5% compared to 67.4% in the 2019 election. However, for the same constituencies where voting is complete, turnout is only marginally lower based on absolute turnout data provided up to Phase 5 at 66.4% compared to 67.8% in 2019.
According to the brokerage firm, the decline in voter turnout has little to do with any single party. “For example, the Congress, the second-largest single party in 2019, saw weaker turnout in 73% of its 44 constituencies, and the YSRCP in Andhra Pradesh saw lower turnout in 55% of its seats.”
The INDIA alliance has mostly brought together parties that were not part of any alliance in 2019, it said. “This has not had any impact on the NDA coalition, apart from minor changes in certain state parties. In 2019, the NDA coalition had 353 seats in Parliament, which is 349 seats of the current alliance. In its present form, the INDIA alliance holds more seats, namely 131 as against 88 in the 2019 elections. If the result of this election is the same as in 2019, the NDA alliance can secure a maximum of 349 seats, unless there are subsequent alliances,” the brokerage added.
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