Since most proposals will have a long gestation period, the full benefits will be reflected in the revenues of companies, and subsequently the stock prices over time
Stocks in the automotive, financial, cement, metal, and hotel sectors are likely to benefit if the Narendra Modi-led Bharatiya Janata Party (BJP) comes back to power for a third time.
The key investment themes have been identified after analysing the Sankalp Patra — the party’s manifesto for the next five years — released on Sunday.
PhillipCapital believes that the push for affordable housing will be positive for state-owned Housing and Urban Development Corporation, major steel and cement companies, and also non-banking financial companies operating in the affordable housing space.
Meanwhile, tourism-related measures will benefit major listed hotels, aviation stocks, and credit card companies.
Additionally, initiatives for rural recovery are expected to benefit fast-moving consumer goods companies such as Dabur, Emami, and Bajaj Consumer.
On Monday, the market overlooked most of these themes due to turbulence triggered by rising tensions in West Asia.
However, once the headwinds ease and there is greater certainty on the election outcome, brokerages believe these themes can benefit investors in the medium to long run.
“While the BJP’s manifesto indicates policy continuity, there is greater scale, clarity, confidence, and rigour at play. In its third term, we expect the party to be more aggressive in terms of execution and policy development.
"Additionally, it is likely to execute plans that were laid out in the previous regime in its next term.
"We expect a broad-based focus across sectors and segments over the next five years,” said a note by PhillipCapital.
Since most proposals will have a long gestation period, the full benefits will be reflected in the revenues of companies, and subsequently the stock prices over time.
“Markets do not doubt that the BJP will come back to power.
"The manifesto has focused on a host of sectors, which is the right strategy if India is to be among the top three economies globally.
"That said, the benefits will not accrue immediately as the proposed measures will take time to be implemented, and the benefits will accrue gradually.
"One has to adopt a stock- and sector-specific approach and buy from a long-term perspective,” said Ambareesh Baliga, an independent market analyst.
Analysts at Antique Stock Broking said the manifesto re-emphasises its view of capital expenditure (capex) cycle revival.
“The manifesto aims to develop India as a developed nation by nurturing all three components of capex, namely a) private capex (helped by establishing India as a global manufacturing hub); b) sustained government capex (as the focus is on building world-class infrastructure); and c) household capex (spurring real estate demand by expanding Pradhan Mantri Awas Yojana to every poor household and supporting affordable housing for the middle class by reducing the cost of ownership),” Antique’s recent report on the manifesto said.
The brokerage’s key overweight sectors are industrial (including defence and railways), cement, real estate, utilities, infrastructure, and automotive, and its 2023-24/2024-25 (FY25)/2025-26 (FY26) National Stock Exchange Nifty 50 earnings estimates stand at 964/1,082/1,245 (implying FY25/26 earnings growth of 12 per cent/15 per cent), respectively.
Accordingly, Antique’s March 2025 Nifty 50 target stands unchanged at 25,000 based on 20x FY26 earnings per share.
The target implies a 12 per cent upside from the current level.
“Expectations of political continuity after the forthcoming Lok Sabha elections 2024 should bolster the overall economic momentum further, with a focus on infrastructure, capex, and manufacturing occupying the centre stage.
"With size and growth in its wings, India’s capital markets are truly poised to embrace the Amrit Kaal going forward,” said Gautam Duggad, head of research for institutional equities at Motilal Oswal Financial Services.
That said, some caution is likely to creep in against the backdrop of geopolitical events, especially the Iran–Israel war.
Iran has launched attacks against Israel over the weekend, escalating the long-standing tensions between the two nations and increasing the risks of a regional war.
This, analysts believe, has the potential to push crude oil prices higher, which will eventually be negative for equity markets.
Thus far in 2024 (with the latest Iran-Israel tussle), Brent crude oil prices have spiked over 16 per cent to nearly $90 per barrel now.
“One needs to keep a close watch on oil prices.
"If the war escalates and prolongs, the overall positives from the election outcome back home — in the short-term — are likely to be capped,” Baliga cautions.
