Here's what brokerages are saying about BJP's 4-0 victory

The outcome of the assembly elections in Madhya Pradesh, Rajasthan, Delhi and Chhattisgarh has turned out to be better than market expectations. The Sensex and Nifty hit new peaks of 21,483.74 and 6,415.25 respectively in early trade Monday.

A glance at how brokerages expect the market to play out in the medium term.

The prospects of a BJP led stable Government in 2014 elections are rising. Final outcome, to a large extent, would depend on whether BJP can replicate success in the state of UP, Bihar and Maharashtra. Cyclical sectors should continue to outperform.

Our favourite cyclicals are ICICI, Axis, Maruti, L&T, M&M and select power utilities.

Market expectations may vary but we expect a gradual economic and fiscal recovery.

Any new government will have to repair India’s fiscal position and address India’s investment challenges.

Investment pick-up may be some time away, given severe challenges in all the inputs (capital, resources, approvals, workforce and land) for investment.

We would not extrapolate these results to a nationwide level for the Lok Sabha elections due in Mar/Apr 2014. Either way, playing on national elections with the market at 14.2 times forward P/E is just too much of a bet. We maintain our 12-month forward Nifty index target of 6,000

State elections results in four states point to a decisive victory for the BJP, and vindicate the market’s positive stance on anti-incumbency. We expect near-term euphoria to gloss over the weak macro (and our cautious portfolio stance) as 2014’s scenarios get recalculated. We would buy beta with rate-cyclicals (financials, capital goods, infra); midcaps would see renewed favour.

This was not exactly the 4-0 expected by the markets, but it comes close. The rally in beta may last a bit longer. But December quarter results are likely to be a wakeup call, as fundamentals on the ground continue to deteriorate. We maintain that this rally in industrials, PSU banks and metals is an opportunity to trim positions.