Modi's return will power India's defence, infra stocks, Motilal Oswal's Agrawal says

Motilal Oswal Financial Services

27/05/2024 12:42

By Bharath Rajeswaran
       BENGALURU, May 27 (Reuters) - Indian Prime Minister
Narendra Modi returning to power for a rare third consecutive
term will boost shares of defence, infrastructure, railway and
capital goods companies, the head of brokerage Motilal Oswal
Financial Services said.
    "These were areas where the government has focussed on,
invested money. High probability that the ruling government will
continue. If they return... they'll go (with) much more vigor,"
Raamdeo Agrawal, chairman and co-founder of the brokerage, said
on Saturday. 
    "In the next 5 years, you'll see major action from the
government, powering these sectors."
    India's weeks-long general elections end on Saturday, with
the ballots set to be counted on June 4. 
    Narendra Modi's ruling Bharatiya Janata Party (BJP) is
expected to return to power, according to opinion polls,
although low voter turnout has led to some concerns about the
margin of victory.
    Analysts see a shock defeat for Modi as an unlikely event,
but fear a market correction - like one witnessed two decades
ago - in the event of an 'unclear' mandate. 
    India's benchmark Nifty 50  .NSEI  had slumped 17% in two
sessions after the 2004 election results, when the then ruling
BJP-led coalition lost, despite being tipped to retain power.   
  
    In his two terms, Modi has focussed on improving India's
ramshackle infrastructure and boosting domestic manufacturing,
including in the defence sector. The government has proposed a
record infrastructure spending of $133 billion in the financial
year 2025.
    Shares of top defence, infrastructure and capital goods
companies have risen between 64% and 480% over the last 12
months, outperforming the Nifty 50's one-fourth rise.
    "If, for whatever reason, there is no clear mandate to the
ruling party, then it's scary. The correction will be pretty
sharp because the expectation built for policy continuity is
very high," Motilal Oswal's Agrawal said.    
    Any changes to the country's capital gains tax regime in the
post-election budget could also hurt the market, he said. 
    "The issue of capital gains tax tweaks is definitely there
on the table. The government has not denied it. It is a major
unknown," Agrawal said. 

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India's defence, railway, infra, capital goods stocks outperform
Nifty 50    https://reut.rs/4dU7Y82
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 (Reporting by Bharath Rajeswaran in Bengaluru; Editing by
Mrigank Dhaniwala)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))