On 4th June these 54 “Modi Stocks” will benefit you if BJP wins!
International brokerage firm CLSA predicts that 54 stocks, including shares of multinational groupings, infrastructure firms, and public sector undertakings (PSUs), will be significantly impacted by a possible third term for the Bharatiya Janata Party (BJP). We call these equities "Modi stocks" because they have beaten the benchmark Nifty 50 index, which was expected to be won by the BJP in the Lok Sabha elections.
A BJP win is expected to help several favored stocks that CLSA has identified. Larsen & Toubro, NTPC, NHPC, Oil and Natural Gas Corp, Power Finance Corp, Reliance Industries, Bharti Airtel, Mahanagar Gas, Ultratech Cement, and Ashok Leyland are a few of these.
Performance and Expectations
These stocks have performed significantly better over the last six months; 90% of them have outperformed the Nifty 50 index. This is explained by the BJP's impressive performance in the state elections that were held in early December, which raised hopes for an easy win in the Lok Sabha elections. The Nifty 50 has increased by 13% since these state elections, whereas the "Modi stocks" have often increased by 50%.
The overwhelming outperformance of "Modi stocks" indicates that the market has already factored in a high probability of the ruling party winning the election. A positive result would boost investor confidence in India's economic expansion and possibly persuade them to participate in it in ways other than through direct policy actions.
In the event of a strong election outcome, "Modi stocks" might continue to perform well, but CLSA cautions that profit-booking may occur in advance of the July budget. This is because many of the benefits that these stocks may have begun to accrue may only become apparent gradually, which could encourage less patient holders of "Modi stocks" to take profits. This pattern resembles what was observed in the previous two general elections when PSU stock prices peaked a few weeks following the outcome.
Because they provide greater risk-reward prospects, CLSA thinks investing in private bank shares would be a better way to profit from expected development in the Indian economy in the second half of 2024. Over the past year, the Nifty Private Bank index has increased by just 6.4%, compared to an 81% increase in the Nifty PSU Bank index. This is because US banks have outperformed. After all, there has been a noticeable backlash against predictions of rate cuts, which has caused private banks to lag.
Overall, The Indian stock market will be greatly affected by a possible third term for the BJP, especially for the "Modi stocks." Even though these equities are probably going to stay outperforming in the event of a solid election outcome, investors should exercise caution when booking profits before the Budget. Conversely, private banks have superior risk-reward prospects and may prove to be a more alluring investment choice in the latter part of 2024
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