Investors have identified a new group of stocks, dubbed “Modi stocks,” which are expected to benefit from the favorable policies of Prime Minister Modi’s government. These stocks go beyond the usual market leaders and include 54 companies within the F&O universe, says global brokerage firm CLSA.
Half of these companies are PSUs, and the list features names such as L&T, NTPC, NHPC, PFC, ONGC, IGL, Mahanagar Gas, Bharti Airtel, Indus Towers, and Reliance Industries (RIL), according to an ET report.
Over the past six months, 90% of Modi stocks have outperformed the Nifty index, compared to only 42% of other companies. CLSA analysts suggest that this trend may persist if the election results are strong.
However, they also predict that the narrow election theme-based rally might conclude in June-July, and banks could offer the best risk-reward growth opportunity in the second half of 2024.
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PM Modi has been openly supportive of PSUs, setting him apart from his predecessors, the ET report said. In August last year, he said, “Share market mein ruchi rakhne wale ko yeh guru mantra hai ki jin sarkari companiyon ko yeh log gaali de na, aap uspe daav laga dijiye. Sab acha hi hone wala hai. (This is a guru mantra for those who have interest in stock markets – invest in PSU companies ridiculed by the Opposition and everything will be good).”
PSU stocks have been re-rated in recent years due to factors such as attractive valuations, high dividend yields, growing order books, and the government’s emphasis on maximizing value for state-owned companies. The late ace investor Rakesh Jhunjhunwala was also highly optimistic about PSU stocks before his passing.
The stock market is optimistic about the BJP securing a significant victory in the Lok Sabha elections, with results to be announced on June 4. Analysts believe that a strong BJP mandate would lead to increased investment in infrastructure, benefiting sectors such as industrials, capital goods, utilities, defense, cement, and real estate.
Also Read | Boost for Indian economy! S&P upgrades India’s credit rating outlook to ‘positive’ from ‘stable’
Conversely, a weaker BJP mandate might result in higher spending on consumption and lower-income households, which could be less favored by broader markets but could benefit consumption-led sectors. Manish Sonthalia, Chief Investment Officer at Emkay Investment Managers, says, “BFSI, PSUs, and industrials are expected to do well. BFSI has led the earnings growth and seen a correction in valuation. Investment-related themes will come into play with power capex building up in the next 3 to 5 years. We are re-rating public sector units as some government entities will have an advantage in sectors such as defence, oil marketing companies, and power financers.”
Analysts anticipate substantial gains following the election results on June 4, with JM Financial advising investors to take advantage of any dips in the market.
After the election, the focus will shift to the Union Budget, which is expected to be presented in July. Policy continuity ensures that the government’s primary emphasis will remain on infrastructure development and manufacturing, benefiting sectors in the defense and capital goods space.
Half of these companies are PSUs, and the list features names such as L&T, NTPC, NHPC, PFC, ONGC, IGL, Mahanagar Gas, Bharti Airtel, Indus Towers, and Reliance Industries (RIL), according to an ET report.
Over the past six months, 90% of Modi stocks have outperformed the Nifty index, compared to only 42% of other companies. CLSA analysts suggest that this trend may persist if the election results are strong.
However, they also predict that the narrow election theme-based rally might conclude in June-July, and banks could offer the best risk-reward growth opportunity in the second half of 2024.
Also Read | More than Pakistan, Nepal, Sri Lanka combined GDPs! LIC’s assets under management cross Rs 50 lakh crore mark
PM Modi has been openly supportive of PSUs, setting him apart from his predecessors, the ET report said. In August last year, he said, “Share market mein ruchi rakhne wale ko yeh guru mantra hai ki jin sarkari companiyon ko yeh log gaali de na, aap uspe daav laga dijiye. Sab acha hi hone wala hai. (This is a guru mantra for those who have interest in stock markets – invest in PSU companies ridiculed by the Opposition and everything will be good).”
PSU stocks have been re-rated in recent years due to factors such as attractive valuations, high dividend yields, growing order books, and the government’s emphasis on maximizing value for state-owned companies. The late ace investor Rakesh Jhunjhunwala was also highly optimistic about PSU stocks before his passing.
The stock market is optimistic about the BJP securing a significant victory in the Lok Sabha elections, with results to be announced on June 4. Analysts believe that a strong BJP mandate would lead to increased investment in infrastructure, benefiting sectors such as industrials, capital goods, utilities, defense, cement, and real estate.
Also Read | Boost for Indian economy! S&P upgrades India’s credit rating outlook to ‘positive’ from ‘stable’
Conversely, a weaker BJP mandate might result in higher spending on consumption and lower-income households, which could be less favored by broader markets but could benefit consumption-led sectors. Manish Sonthalia, Chief Investment Officer at Emkay Investment Managers, says, “BFSI, PSUs, and industrials are expected to do well. BFSI has led the earnings growth and seen a correction in valuation. Investment-related themes will come into play with power capex building up in the next 3 to 5 years. We are re-rating public sector units as some government entities will have an advantage in sectors such as defence, oil marketing companies, and power financers.”
Analysts anticipate substantial gains following the election results on June 4, with JM Financial advising investors to take advantage of any dips in the market.
After the election, the focus will shift to the Union Budget, which is expected to be presented in July. Policy continuity ensures that the government’s primary emphasis will remain on infrastructure development and manufacturing, benefiting sectors in the defense and capital goods space.
