International brokerage CLSA identified 54 companies that will be direct beneficiaries of the current government's policies, with public sector undertakings (PSUs) making up half of these beneficiaries.
These firms are from capex and infrastructure-linked sectors, PSUs or stocks of some corporate houses. The brokerage has named these as “Modi stocks,” since they have been rallying based on prospects of the BJP coming back to power.
The past six months have seen an election-focused rally wherein 90 percent of the “Modi stocks” have outperformed the Nifty. This trend is likely to continue, particularly if the incumbent government returns with a strong majority, said the brokerage.
L&T, NTPC, NHPC, PFC, ONGC, IGL, and Mahanagar Gas are among the preferred stocks, which are poised to benefit significantly from a favorable policy environment. However, CLSA noted that the narrow election-theme based rally might end in June-July.
CLSA predicted that PSU stocks could continue to rise until June or July, ahead of the budget announcement.
This increase may be driven by a narrow, election-themed rally expected to taper off by mid-year. Following the elections, investors could face a “reality check”, said the global brokerage. A similar historical pattern was observed in the last two elections, where PSUs topped-out following the results.
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According to CLSA, in the second half of FY25, banks present the best risk-reward play on India's growth landscape. Excluding stocks which will benefit from government policies, banks such as HDFC Bank, ICICI Bank, Axis Bank, and IndusInd Bank are attractive due to their growth potential.
The clear pushback on rate-cut expectations has allowed American banks to outperform year-to-date, contrasting with the underperformance of Indian private banks, which have been laggards.
Other stocks that have been highlighted by CLSA’s analysts are Ashok Leyland, UltraTech, and L&T. Additionally, CLSA has expressed positivity in Bajaj Finance, Max Financials, Zomato, and DMart. Among the telecom-related sectors, Bharti Airtel, Indus Towers, and Reliance Industries stand out as the top picks.
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