Election results will be out on May 23 and exit polls indicate that the Narendra Modi-led NDA Government is set to return to power. The stock market is definitely pricing in the return to power of a BJP Government. Indeed, the day exit poll results were announced, the benchmark Sensex surged 1421.9 points to close at a record high of 39,352.67. This represented the biggest one-day rise in the last six years. While a negative surprise will trigger a sell-off, there will continue to be pockets of the economy where strong growth is expected.
Let’s look at some of the <top indian sectors to invest in 2019 and analyse how those sectors will> benefit, now that the general elections results are out:
If the Modi Government returns to power, core infrastructure players like L&T, ABB, BHEL, BEL, Bharat Earth Movers, NCC and Sadbhav Engineering will soar, as close to US$10 billion worth of infrastructure projects are likely to be awarded once the new Government takes charge. Road execution has progressed at a rapid clip, growing from 11 km per day in 2014 to 30 km in 2019.
Ports and shipping are two sub-sectors within infrastructure that will do particularly well.
India’s energy deficit was between 8 and 10% during 2011-13, improved in FY2014 to 4-4.5%, and subsequently contracted to 0.7%, a CARE Ratings report said. If voted back to power, the Modi Government is expected to make further investments in the power sector that will benefit companies such as Power Finance Corporation, Rattan India Power, Ratan Infra, KSK Energy, Adani Power, NTPC, Tata Power, NHPC and Power Grid Corporation.
BJP had announced in their manifesto in March this year that they would push to improve farm productivity in India. The party will launch a pension scheme for small and marginal farmers over 60 years of age and spend Rs. 25 trillion to improve farm sector productivity.
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The Modi Government’s return to power is likely to propel agriculture stocks such as Rashtriya Chemicals and Fertilizers, Rallis India, Monsanto, United Phosphorous, Jain Irrigation, Advanta, PI Industries, Excel Crop Care, M&M and Tata Chemicals.
The auto sector has experienced a slowdown in sales. Passenger vehicle growth in FY2019 was the slowest since 2014. However, the Modi Government’s poll sops for the farming belt will leave more money in the hands of farmers that will be spent on purchasing tractors, cars and two-wheelers in the rural market. Hero Motocorp, Maruti, Tata Motors and M&M are likely to benefit if BJP returns to power.
A new Government at the centre may provide some relief to the beleaguered banking sector. Banks have been in the clean up mode for some time now and asset quality cycle appears to have bottomed out.
Government-owned banks will need to provide against gross non-performing assets through 2020 but the worst seems to be behind for the banking sector. The brokerage firm, Bank of America Merrill Lynch is bullish on the sector as well. ICICI Bank and Axis Bank are two stocks that are likely to rally post the election results.
Whatever is the election result, the importance of a strong and stable Government in India’s overall growth story can’t be overemphasized. The new Government will take charge amid a slowing economy and will have to use both fiscal and monetary measures to revive the economy.
While it is certainly not an enviable position, the opportunity to transform the trajectory of India’s development is huge, should Narendra Modi get re-elected with a majority this week.
Sources: CNBC TV18, Economic Times, Indian Express and more