Domestic markets are expected to open on a positive note following the great success of the BJP-led alliance in the Maharashtra state assembly elections. Gift Nifty at 24,280 against Nifty Nov futures close of 23,886 and Nifty Oct futures value of 24,023 indicates a gap-up opening of about 200 points for Nifty.
Domestic brokerage Motilal Oswal Financial said, “With elections now behind and the BJP getting a strong boost from Haryana and Maharashtra elections, we expect the government to now focus on spending (1HFY25 govt. spending is flat YoY and is down 17 per cent for Capex spending). This poll result, coupled with a recovery in rural spending (on the back of a good monsoon and expected strong Kharif output), should improve the demand narrative at the margin.
According to Emkay Global Research, the BJP-led Mahayuti alliance swept Maharashtra, registering many more seats than exit poll predictions, while the INDI alliance retained power in Jharkhand, proving most pollsters wrong. Among several other factors, pre-poll populist promises were a key driver for such thumping victories for incumbent governments in both states.
‘Populism to hurt’
“This is a continuation of the last 18-month trend, and freebie/populist schemes are here to stay given their electoral success. The MYA win bodes well for MH, as consolidated Centre + state politics should allow a pick-up in stalled infra development and other pending issues. However, both states will see higher fiscal pressure from increased spending on financial assistance for women, and states’ FY25 FD/GSDP is likely to slip to 3.15% (FY25BE: 3.0%) on aggregate, with sharp cuts in capex to keep deficits under control,” it cautioned.
In a separate note, the broking firm said, “We cut our Nifty target by 4% to 25,000 from 26,000, despite a 3M rollover to Dec-25. This is a reaction to a poor earnings season marked by weak consumption demand and worsening cash flows. We think the markets will mark time in the immediate future, despite the 10% correction since 27-Sep-2024. Our sector preferences stay the same—OWT on IT and Energy, and UW on Financials and Staples.”
The focus now shifts to economic activity and foreign portfolio investors’ activity, analysts said.
Marriage season
The wedding season in 2HFY25 (30 per cent higher weddings YoY) will also provide a fillip to demand, said the Motilal Oswal report.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said that the total amount of FII selling through the exchanges from 1 October through 23 November stands at a whopping ₹1,55,730 crore. This is the kind of selling that happens in a year when FIIs are in selling mode.
“Mainly three factors led to this massive selling by FIIs. One, the ‘Sell India, Buy China’ trade. Two, the concerns surrounding FY25 earnings. Three, the ‘Trump trade.’ Of the three, the ‘Sell India, Buy China’ trade is over. The Trump trade also appears to be on its last leg since valuations have reached high levels in the US. Therefore, the FII selling in India is likely to taper off soon. Also valuations of largecaps in India have come down from the elevated levels. FIIs have been buying IT stocks and this has been imparting resilience to IT stocks. Banking stocks have been resilient despite FII selling, mainly due to DII buying,” he added.
Cautious approach needed
According to Krishna Appala, Sr. Research Analyst, Capitalmind Research, In the broader market, corrections are creating opportunities to accumulate quality stocks with strong fundamentals and resilience to macroeconomic pressures. Despite global challenges, India’s long-term growth story remains compelling. “Investors should focus on sectors aligned with structural themes such as urbanization, infrastructure, and consumption growth. Strategic portfolio adjustments, disciplined investing, and a long-term perspective are critical to navigating the current environment,” he said.
Technically, the market is still weak despite a sharp rally on Friday, said Lovelesh Sharma, Consultant, SAS Online – a deep discount.
“Firstly, breadth tells us otherwise on the weekly chart, since the week ended positive but the number of stocks above their short to mid-term moving averages remain downward sloping, while on Daily chart, signals remain mixed. Secondly, the net new high to new low index is still not turned, he said adding that rather “we would rather be cautious in approach.”