Indian Stock Market Indices Surge to Record Highs Post Lok Sabha Election Results 2024
The Indian stock market indices, Sensex and Nifty 50, have reached record high levels after experiencing heightened volatility during the Lok Sabha election results of 2024. The markets saw a strong selloff by overseas investors, but this was offset by domestic buying through Systematic Investment Plans (SIP).
With the uncertainty surrounding the elections now resolved, the National Democratic Alliance (NDA) government has come into power with the support of around 300 Members of Parliament. Analysts are closely watching the performance of the Bharatiya Janata Party (BJP) and Prime Minister Narendra Modi in leading the alliance government.
Amnish Aggarwal, Director of Research at Prabhudas Lilladher, anticipates that the NDA government will continue to focus on capital expenditure-led growth in sectors such as Production Linked Incentives (PLI), Roads, Ports, Aviation, Defence, Railways, and Green energy. The government is expected to benefit from a lower fiscal deficit in FY24, normal monsoons, and a dividend of ₹2.1 lakh crore from the Reserve Bank of India (RBI).
Aggarwal also highlights the government’s potential increased focus on farmers, rural and urban poor, and the middle class to counter the impact of recent electoral reversals in certain states.
The market strategist remains positive on sectors such as Auto, Banks, Asset Management Companies (AMCs), Capital Goods, Defence, Hospitals, Pharma, Cement, Aviation, and Discretionary consumption. He believes that a progressive Union Budget, normal monsoons, and strong inflows will further boost the markets.
In the fourth quarter of FY24, companies in the Travel, Chemicals, Housing Finance, and Media sectors exceeded sales expectations, while Telecom and Oil & Gas companies fell short. Banks, Capital Goods, Cement, Chemicals, and Media performed well in terms of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), while Building materials, Telecom, and Consumer companies lagged behind. Cement, Capital Goods, Chemicals, Oil and Gas, and Travel sectors outperformed in terms of Profit Before Tax (PBT), while Media, Metals, and Consumer sectors struggled.
The Nifty 50 is currently trading at 19.2x 1-year forward EPS, in line with its 15-year average. The brokerage firm values the Nifty at its 15-year average PE with a 12-month target of 25,816 in the base case scenario. In the bull case, the target is set at 27,102, while in the bear case, it is projected to reach 23,235.
Prabhudas Lilladher has made adjustments to its Model Portfolio, reducing weights on certain stocks while increasing exposure to others. The firm is overweight on sectors such as Auto, Banks, Capital Goods, Consumer, Healthcare, and Telecom, while being underweight on IT, Metals, Diversified Financials, and Oil and Gas.
In its High Conviction Picks, the brokerage firm has made changes to its recommendations, adding BEML and ITC while removing other stocks. Investors are advised to consult with certified experts before making any investment decisions.
Overall, the Indian stock market is experiencing a positive trend post the Lok Sabha election results, with investors closely monitoring the government’s policies and market performance.
