SBI, Titan, Hindalco, BSE among 21 major stocks, which will be bought as NDA win in Maharashtra which seems to aggravate the rally risk.
After the landslide victory of the NDA in the Maharashtra elections, domestic brokerage Motilal Oswal Financial Services (MoFSL) said that as the elections in these two states are now over, it should return the downside to the markets.
In Maharashtra, the last five years have been marked by political instability, with musical chairs often operating in the CM’s job. This decisive decision ends the long-term instability in one of India’s most industrialized and economically important states, added the report of brokerage ‘India Politics’.
Moreover, BJP’s strong performance (it won 132 seats; majority mark 145) will ensure stability in governance and bring renewed focus on infra development, the report stressed.
Market perspective
The brokerage held that among many factors including weak Q2 earnings, dollar gains, uncertainty over the geo-political landscape and continued FII outflows, all major indices in the last 2 months from the highs recorded on Septenber 27 have adjusted upward. Also, the Maharashtra election worries are also behind us with more clarity.
With the elections behind us and the BJP gaining solid ground in the Haryana and Maharashtra elections, we expect the government to now focus on spending (1HFY25 govt. spending is low YoY and 17% down on Capex spending). This survey result, coupled with the recovery in rural spending (after good rains and expected strong Kharif output) should improve the demand narrative at the margins. The wedding season in 2HFY25 (marriages 30% higher YoY) will also provide a fillip to demand, the report added.
Profit-taking is also evident with Nifty gains expected to grow by 7% in 2H compared to 4% in 1H as a small risk-on rally could be encouraged given the improvement in sentiment.
Given the recent correction, we believe valuations, especially large caps, are reasonable now at 19.3x FY26E EPS. Midcaps and Smallcaps still trade at expensive valuations, with the NSE Midcap 100/NSE Smallcap 100 trading at a P/E of ~30x/~23x. The volatile geopolitical backdrop and the movement of the dollar index will be near-term observations.
Preferred Sectors: BFSI (Private and PSU and non-lending NBFC), Capital Assets, Real Estate, Manufacturing, Consumer Discretionary, IT, Healthcare.
Largecap stocks selected by MOFSL: M&M, SBI, L&T, Indian Hotels, ABB, Dixon, Bharti Airtel, TRENT, HINDALCO, Titan, HCL Tech;
Midcap Stocks: ANGEL, BSE, AMBER, IPCA, CUMMINS, PAGE, Godrej Property, CFOrge, JSW Energy, Gravita
