Views of Mr. Sunil Kapoor, Executive Director on the expected priorities of the new Indian government in ET Online

May 16, 2014

2014 Lok Sabha elections: Top five sectors which are likely to do well with Narendra Modi as PM

NEW DELHI: It was historic event for India markets with benchmark indices scaling to fresh lifetimes highs in trade on Friday, as the Bhartiya Janta Party (BJP) emerged as the single largest party to form the government with Narendra Modi as the new Prime Minister.

Narendra Modi has won the general election in a landslide. The fact that the BJP looks set to secure an absolute majority in the Lok Sabha gives Modi a much greater chance of effecting real change and driving a new investment cycle.

Next big question in front of investors is - where should one invest? Which sector is looking attractive and is likely to do well in near future?

While Sensex has made fresh life time highs, the performance of various sectors have been quite divergent. Pharma, IT and Auto have been best performers in the last six years, while Banking, Oil & Gas, Capital Goods and metals have been worst performers.

Most analysts expect this trend to start to reverse going forward.

"Narendra Modi will have to enhance the overall business environment, which has taken a back seat due to policy paralysis in last 12-18 months of the UPA II regime," said Sunil Kapoor, Executive Director, Capri Global Capital Limited 

"As soon as Modi comes to power, the top priority issues that he needs to address are develop infrastructure, simplify the taxation system, ease FDI regulations, increase dependence on exports than imports, reverse the fiscal deficit rise and boost education system, especially for girl child," he added.

On the macro side, the top priority for the new government would be accelerating the growth rate which fell below 5 per cent, the slowest in a decade. To achieve that, decision-making will have to be speeded up and big ticket infrastructure projects need to be implemented.

"With interest rates not expected to increase, we have turned positive on interest rate sensitive sectors like banks, capital goods and automobiles. And for India Inc. capex cycle should also revive although with some lag," said Varun Goel, Head PMS, Karvy.

"Big infrastructure projects need to be provided quick access to capital, speedy environmental and forest clearances and policy support. Several large projects have got stalled in last few years. We expect that the new government will identify some large infrastructure projects and concerted push will be given to drive them to completion," he added.