The exit polls indicate that the ruling National Democratic Alliance is likely to come back with a thumping majority.
The ruling NDA is forecast to win around 370 seats, as against 353 seats won in 2019, according to the average of all exit polls.
Today’s Chanakya, the only agency that predicted the 2014 seats correctly, has estimated 400 seats for NDA. Meanwhile, the highly respected and eagerly awaited Axis MY India Exit Poll (the agency that accurately predicted 2019 and has a track record of correctly predicting 64 out of 69 polls to date), has placed the NDA in the higher range with 400 seats (361-401).
According to domestic brokerage Motilal Oswal, PM Modi/BJP’s victory would augur well for the economy and capital markets as it would provide stability and continuity in policy-making, with a single-party majority government, which would be expected to continue pushing its economic agenda.
“Equity markets displayed some anxiety and nervousness recently around the impending political uncertainty, which resulted in a sharp rise in volatility in April and May’24. With this clear verdict, markets will heave a sigh of relief, in our view, and go back to fundamentals/business-as-usual mode,” it said.
“We remain overweight on Financials, Consumption, Industrials, and Real Estate. Industrials, Consumer Discretionary, Real Estate, and PSU Banks are our key preferred investment themes.” it added.
Top stock picks for Motilal Oswal are: Large caps – ICICI Bank, SBI, L&T, Coal India, M&M, Adani Ports, ABB, HPCL, and Hindalco; and Midcaps: Indian Hotels, Godrej Properties, Global Health, KEI Industries, PNB Housing, Cello World, and Kirloskar Oil.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said exit polls results which indicate a clear victory for the NDA with around 360 seats, completely removes the so-called election jitters, which weighed on markets in May.
“This comes as a shot-in-the-arm for the bulls, who will trigger a big rally in the market on Monday,” he said, adding that largecaps in financials, capital goods, automobiles and telecom are likely to lead the rally.
Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said: Election results will pass on with flying colours, and the focus will now shift towards Capex, Govt spending, valuations and earnings growth. We all have been waiting for the strong verdict of the new government since long, and it will be clear by this week.
“While volatility will continue to be there in the markets, we may see some ‘sell-on-raise’ patterns due to sudden spikes for profit-booking attempts. After the formation of the new government along with the new cabinet, the Street will start talking towards the next Full Union Budget, which will place India’s growth for the next five years, which would eventually elevate corporate earnings.”
Along with the Exit Poll, other factors to trigger the markets towards a positive trend include short covering, stronger domestic Q4 GDP numbers, early rainfall expectations, lower crude, rally in the US markets, and easing of the geopolitical situation, he further said.
The Next 100 days of the newly formed Govt will be important. The combined market capitalisation of companies’ listed market valuation grew by $1 trillion in just six months. Can a similar type of magic be repeated, targeting doubling of the market-cap to $10 trillion in the next four-five years, with the sectors to focus on including PSU, Power, Defence, Railways, Capex-driven sectors.
According to Emkay Global, if the final election outcome is in line with the exit polls, it would likely calm investor nerves as political and policy continuity will be good for risk assets in the immediate run, and macro stability in the medium term.
Once the election event risk is over, all eyes would be on the Budget in July, which could continue with the consolidation process, while improving the Budget internals. The Centre’s provisional FY24 fiscal estimates project FD/GDP even lower at 5.6 per cent (FY24RE: 5.8 per cent), making the starting point for FY25 even better.
Besides, the windfall fiscal bonanza of about 0.4 per cent of GDP from the RBI provides more choices to the Centre in allowing further fiscal correction, or seeing higher capex/revex spend, besides cushioning against any revenue slippage. Either way, steady fiscal consolidation should help ease sovereign and corporate yield curves, and keep the upward momentum in the bond market.
“We watch for evolution of FPI flows and steady FDI flows in FY25 closely,” it added.
According to Dhiraj Relli, MD & CEO, HDFC Securities, “Unless we get a surprise in the balance exit poll predictions, the Indian markets may not react majorly to these numbers on a closing basis.
In any case, the disappointment or the euphoria may settle down in a couple of days, and the focus may shift to policy announcements in the first 100 days of the new Govt, he said.
According to Motilal Oswal, “Fundamentally, India is witnessing its own mini-Goldilocks moment with excellent macros (GDP growth of 8.2 per cent in FY24, on the back of around 7 per cent growth in FY23, inflation at around 5 per cent, both current account and fiscal deficits well within the tolerance band, stable currency, etc.), solid corporate earnings (Nifty ended FY24 with 25 per cent earnings growth and FY25/26 earnings are likely to post 14-15% CAGR), focus on manufacturing, capex and infrastructure creation, and valuations at 20x one-year forward earnings. This verdict and consequent political stability and continuity in policy-making will serve as the icing on the cake and keep India as the cynosure of all eyes.
‘Book profit’
Amit Goel, Co-Founder & Chief Global Strategist, Pace 360, said: The exit polls yesterday predict a favourable scenario for the Indian markets, with the NDA expected to secure around 350-360 seats when counting concludes on June 4.
“We anticipate Indian equities to rise over the next 3-4 days, with the Nifty reaching a new all-time high this week. We expect the Nifty to reach approximately 23,200-23,300 levels during this period.”
Additionally, he expects the India 10-year yield reaching 6.9 per cent, and the INR appreciating to 82.75.
“We believe investors can buy the gap-up on Monday, June 3, as the above scenario unfolds, with particular emphasis on PSEs, and defence and infrastructure companies. In the longer term, we continue to believe that Indian equities represent the biggest bubble in the history of world equity markets. We expect the Nifty to correct down to 18,000 levels by October 2025. Therefore, we recommend that investors book profits when the Nifty climbs above 23,000 and gradually reduce their exposure to Indian equities,” he added.