Lok Sabha Exit Polls: India's 'Mini-Goldilocks Moment', Relief Rally To Continue, Say Brokerages

Top brokerages expect the Indian stock market to shed its earlier volatility and react positively in the coming days, as an average of key exit polls project the National Democratic Alliance to increase its Lok Sabha strength from 352 in 2019 to 365.

Prime Minister Narendra Modi is set to pull off a third straight election victory, with a full majority for his coalition, according to the exit polls.

The consensus among brokerages is that an expected victory of the Bharatiya Janata Party augurs well for the economy and capital markets as it provides stability and continuity in policymaking with a single-party majority government, which will be expected to continue pushing its economic agenda.

India is witnessing its own mini-Goldilocks moment with excellent macros, solid corporate earnings, focus on manufacturing, capital expenditure and infrastructure creation, and valuations at 20 times the one-year forward earnings, according to Motilal Oswal Financial Services Ltd.

• Pro-incumbency wave would imply policy continuity, a sustained focus on capex, fiscal consolidation in the final budget and potential factor market reforms.

• Expects positivity for local markets through foreign portfolio inflows and selling of USD/INR. Favour short USD/INR, with a high conviction level of 4/5, targeting 80.8 by mid-July.

• Expects domestic sectors, particularly those related to infrastructure, manufacturing and the capex theme, to outperform in the near term.

• Clear verdict to shift focus back on fundamentals and business-as-usual mode.

• India witnessing its own mini-Goldilocks moment with excellent macros, solid corporate earnings, focus on manufacturing, capex and infrastructure creation.

• Remains overweight on financials, consumption, industrials, and real estate.

• Industrials, consumer discretionary, real estate, and PSU banks key preferred investment themes.

• No major reaction expected on a closing basis; any disappointment or the euphoria may settle down in a couple of days.

• The BJP's return is good for continuing and accelerating the reform process.

• Infrastructure, BFSI, capital goods, telecom could be the key beneficiaries.

• The new NDA government could accelerate reforms in key areas like electricity and agriculture.

• Positive on sectors like infrastructure, cement, private banks, NBFCs, select industrials; negative on IT and chemicals, and neutral on most consumer sectors.

• Continuation of relief rally can happen; Nifty could touch 23,500 briefly.

• Higher seat tally could increase magnitude but not duration of the rally though broader outlook is unchanged.

• A favourable verdict will be 'positive' for manufacturing.

• Weak: IT, consumption.

• Continue to hold view of high single-digit returns from markets this year.

• Modi 3.0 to focus on macro stability, rural stress and building global manufacturing hubs.

• Expect rural spending to pick up by December.