BJP victory, Sensex and Nifty targets: Stocks, sectors to watch out for if PM Modi is re-elected

Indian stock markets are witnessing volatility due to the results of the 2024 general elections, which will be announced on Tuesday, June 4. Participants in the BT Markets election poll are hailing a clear victory for the National Democratic Janata Party (BJP) Alliance (NDA), which sees it winning 300-350 seats in the Lok Sabha elections.

With the mercury approaching an electoral peak, market expectations are mainly for the incumbent government to return to power with a clear majority and the belief that markets have already priced in a BJP victory. However, if the current government fails the majority, we could see a knee-jerk negative reaction, they said.

Amnish Aggarwal, director of institutional research at Prabhudas Lilladher (PL), said the market is pricing around 300 seats for NDA. Policy continuity will significantly increase investor confidence. “We don’t really consider extreme scenarios for the most part because they don’t seem likely,” he said.

For the sake of argument, if the BJP wins a clear majority, there is more reason for a very positive market reaction, primarily because of the confidence that the continuation of the policy will influence investor sentiment. Anticipating these factors, PL has raised the 12-month target for Nifty 50 to 25,810 from 25,363, he said.

Arpit Jain, managing director at Arihant Capital Markets, expects Nifty to touch 24,000 levels in the near future if the BJP wins decisively, while he expects the benchmark index to correct to 20,500 levels if it fails to get a majority. He predicts a potential index movement of 7-8 percent in extreme cases, which could lead to profit booking or correction.

Apurva Sheth, director, market outlook and research, SAMCO Securities, expects the BJP-led NDA to win around 300-320 seats. Most market participants also seem to follow that number, he said.

If the Modi government gets a large majority, it is possible that Nifty could touch 24,200 and Sensex around 78,500, said Ravi Singh, senior vice-president (retail research) at Religare Broking.

“In a possible scenario resembling the 2019 election results, Nifty could potentially touch 23,500 while Sensex could potentially touch 77,000. If a coalition government is formed with the NDA, it is predicted that Sensex could potentially touch 72,000 while Nifty we can target in the amount of PLN 22,000,” he said.

The BJP came up with the slogan ‘Abki baar, 400 paar’ which aimed to win over 400 seats for its pan-India alliance called NDA, while the BJP itself was hoping for 370 seats in the Lok Sabha. However, market analysts expect that lower early turnout and strategic moves by the INDI Alliance could keep the numbers in check during the next general election.

Commenting on the pledge of over 400 seats of the BJP, Nikunj Saraf, vice-president of Choice Wealth, said that the target will not be a piece of cake for the NDA as this opponent has built in the last 10 years which may impact its prospects of concluding an NDA touching or marginal exceeding recent numbers will be a good, unbiased assessment that we can expect.

“The market appears to have discounted the same amount that we have achieved over the last 6 months, but as we get closer to the conclusion of the election and its results, we may see a sharp increase in volatility,” he said.

Market experts believe that a clear victory for the BJP-led NDA government will mean a continuation of current economic policies with the advent of more reforms. They are positive about thriving sectors and stocks, with a greater emphasis on capital spending and infrastructure for all round economic growth.

“Under the leadership of the BJP during its last term, the government focused on capital expenditure. This has helped companies in sectors such as railways, defence, engineering and capital goods. These sectors should be in the spotlight of investors if the BJP returns to power,” added Sheth of SAMCO Securities.

If the BJP wins over 272 seats and PM Modi retains the post of Prime Minister, a positive market reaction is expected, especially if the NDA reaches close to 400 seats. Domestic sectors such as financials, consumer discretionary, industrials/infrastructure and PSUs are likely to outperform, said Choice Broking’s Saraf.

Arihant Capital’s Jain suggested investors look for sector-specific opportunities in MNCs spanning PSUs, railways, defence, agriculture and manufacturing. These sectors are likely to benefit from the formation of a BJP government for the third time. “However, it is worth buying in tranches,” he said.

Narendra Solanki, Director, Fundamental Research – Investment Services, Anand Rathi Shares and Stock Brokers, believes that overall, the domestic sectors should largely continue to perform well if a BJP-led government is formed for the third time. He is positive on manufacturing, defense, infrastructure, railways, electric vehicles, EMS, power supplies, finance and consumers to keep pace with the economy’s growth.

PL selected L&T, Adani Port, Road & Metro EPC from Infra space; Siemens, ABB, Carborundum, Schneider, ESAB, Ingersoll Rand, Kirloskar Pneumatic from the Capital Goods area; HAL, BEL, BDL, BEML, Mazagon Dock, Cochin Dockyard from Defense space; Ultratech and Ambuja Cement from the Cement space.