With India entering into the final phase of voting and waiting with baited breath for the general election results, experts are betting on a market rally in case of a favourable outcome, ie, Prime Minister Narendra Modi’s BJP-NDA winning with a comfortable majority.
Manish Sonthalia, Chief Investment Officer of Emkay Investment Managers, predicts that the Nifty index could rise to 24,500 by December 2024, assuming no negative surprises from the election results. By the fiscal year 2026, he expects Nifty to rise further to as high as 26,500.
He advises a balanced investment strategy between largecaps and midcaps, with key growth in BFSI, PSU, industrials, infrastructure, power, and a recovery in pharmaceuticals.
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Market eyeing 330 seats for NDA; here’s how it may react in various scenarios
"The market is broadly anticipating around 330 seats for the NDA. If this happens, we likely won't see a significant initial reaction. However, the markets will take time to digest these numbers, with the next key focus being the budget," Sonthalia said during a webinar.
He noted that if the NDA secures 370-400 seats, market sentiment would become extremely euphoric. Conversely, if the NDA wins fewer than 300 seats, it would negatively surprise the market.
Sonthalia emphasised that the market is currently more focused on domestic issues. Should the incumbent government continue, potential reforms in land, labour, and the judiciary could be on the agenda. Financial inclusion reforms and improvements in the ease of doing business are key areas that foreign institutional investors (FIIs) will be keenly monitoring.
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Investors advised to follow balanced strategy with these sectors in play
He expects the Nifty 50 to see earnings growth of nearly 15 percent in FY25 and FY26. He advised traders to balance their investments between large-cap and mid-cap stocks to capitalise on broad-based growth in the Indian equity market. "From a medium to short-term perspective, most of the delta would come from the broader market," said Sonthalia.
Sonthalia sees more upside in the BFSI (banking, financial services, and insurance) and PSU (public sector undertakings) segments. Industrials, infrastructure, and power are also in focus. "Pharmaceuticals, which experienced a slump after COVID, are expected to make a significant comeback," he added. He expressed caution over commodities due to the inflationary environment.
Sonthalia also noted that the consumer discretionary sector should be watched closely, as the premium end of the segment is performing well and rural recovery is on the horizon. However, stock valuations in this sector are expected to remain high.
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