“Assuming a stable alliance under Modi’s leadership for the next five years, we recommend buying equities on a steep correction. We do not see any chance of a non-NDA government coming to power,” said the brokerage firm.
Concerns over low voter turnout overblown
While the stock market’s biggest concern about the poll outcome is low voter turnout, Phillip Capital believes these concerns are overblown and unwarranted.
“The decline in voter turnout is largely unrelated to any single party. For instance, Congress, the second-highest single party in 2019, saw weaker participation in 73 per cent of its 44 constituencies and YSRCP in Andhra Pradesh saw 55 per cent of its seats seeing lower turnout,” said Phillip Capital.
The brokerage firm underscored that the average voter turnout is lower at 65.5 per cent, based on a simple average of turnout data released till phase 6, versus 67.4 per cent in the 2019 elections. For the same constituencies where voting is completed, voter turnout is only marginally lower at 66.4 per cent, based on the absolute voter turnout provided till phase 5, versus 67.8 per cent in 2019.
Also Read: Lok Sabha elections 2024 trading strategy: Poll-driven equity weakness buying opportunity, says UBS
“Out of 485 constituencies where voting is over, 155 saw higher participation, while 330 saw lower turnout. Of these 485 constituencies, 279 are currently ruled by BJP (192 constituencies saw lower turnout). BJP-ruled constituencies had a 10-percentage point reduction (ppt) in voter turnout in six constituencies (MP, UP, and Arunachal). Around 50 constituencies, mainly from MP, Rajasthan, Gujarat, and UP, saw 5-10ppt, and 135 seats were below 5ppt,” Phillip Capital observed.
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Phillip Capital sees the return of NDA
Phillip Capital sees three scenarios for the Lok Sabha election outcome, all of which suggest the possibility of the NDA retaining power at the Centre.
In the base-case scenario, Phillip Capital expects 290-300 seats for the BJP and 330-340 seats for the NDA. “If this pans out, we have a positive near/long-term stance in equities, earnings, and economy, assuming policy continuity and execution,” said the brokerage firm.
In a bullish scenario, the BJP may win more than 325 seats, resulting in over 360 seats for the NDA. Phillip Capital said this should result in a sharp rise in equities.
Phillip Capital said a bearish scenario in which the BJP does not secure a majority but the NDA forms a government under the leadership of Narendra Modi as PM might lead to a sharp sell-off in equities.
Assuming its base-case scenario will play out, Phillip Capital is positive on several sectors, including automation, EVs, defence, railways, logistics, ports, roads, real estate, metals, cement, energy, and financials.
From the long-term and structural perspective, the brokerage firm continues to like cyclical over consumer space.
Stocks to buy
Short-term picks
SBI, Bank of Baroda, Canara Bank, 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) are Phillip Capitals top picks for one-year perspective.
Long-term picks
HDFC Bank, ICICI Bank, SBI, Kotak Mahindra 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 Fluorine, PI Industries, Coromandel and Dhanuka Agritech are Phillip Capital’s top picks from a two to three-year perspective.
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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.
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Published: 30 May 2024, 11:12 AM IST
