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.

Views of Viswajit Srinivasan, Director - Business Development, Wholesale Lending, Capri Global Capital Ltd. in ET Online

May 15, 2014
Don't expect a 'spectacular rally' on Friday the 16th, say analysts

NEW DELHI: It may not be official yet, but it looks like the markets are discounting a scenario where the NDA forms a government with Narendra Modi as a Prime Minister on Friday, May 16. 

We have already witnessed a massive spectacular rally of over 1,500 points on the S&P BSE Sensex in a matter of just three trading sessions starting Friday. All the exit polls have unanimously given the BJP-led NDA a seat tally which is near majority of 272 seats, which will enable them to form government and Modi to become India's 14th PM. 

However, the real picture will be out on May 16 only. The rally is primarily driven on the hopes of exit polls and these polls have been misleading in the past two elections, say analysts.

Even if the NDA does come to power but with seats lower than market expectations, we may see some bit of profit booking, say experts. The runaway rally seen so far on the benchmark indices will only extend marginally even if a stable business-friendly government comes to power on May 16, because most of it is already factored in.

"Exit polls have not been completely reliable, as has been evidenced in the past. However, the overwhelming view is that there would be an NDA-led government at the Centre and this has already been factored in by the market at the current levels," said Viswajit Srinivasan, Director - Business Development, Wholesale Lending, Capri Global Capital Ltd.

"In the event of a significant difference between the exit poll results and an unstable government at the Centre, the market would see a big correction. The volatility would definitely be high and retail investors would be best placed to not enter till there is clarity on which party is likely to lead the next government formation," he added. 

The recent run-up seen in benchmark indices is evident from the fact that the markets are pricing in some probability of the BJP-led NDA government at the Centre. If the exit poll numbers are in favour of NDA, there is a possibility of a sharp up-move while a vice-versa situation could be disastrous for the markets, say analysts.

"It seems the NDA may form the next government at the Centre. The Nifty around 7100 levels suggests a lot of good news is already factored in. Having said that if there is a fractured mandate, with the NDA bagging around 220 seats, then the markets will be in shock," said Raamdeo Agrawal, joint managing director of Motilal Oswal.

"I think that NDA will get 225-230 seats as no one's prediction has been below that. So let's not talk about something which is completely surprising, like the UPA getting 250-270 seats," he added.

The last three days saw the Nifty rallying over 100 points and the index is now trading comfortable over 7000 levels. Experts feel that traders should book some bit of profits as the rally might not be that strong on Friday.

"I have been advising my clients now for the last 8 to 10 days, saying that at every rise it is time to book profits to a certain extent. Investors should look at liquidating 30% to 35% of their portfolio, especially if they have bought in the last five or six months," said Ambareesh Baliga, Managing Partner-Global Wealth Management, Edelweiss Financial Services.

"It is always prudent to book out to a certain extent, because the best of the news is already there in the price and assuming that they have a complete majority as per the exit polls, we can possibly have one more bump up may be of 150-200 points," he added.

But Baliga is of the view that the pop may not really be worth playing, because in case the final result is different and negative compared to the exit polls, the downside could be huge. So it is better to take that bird "It is always prudent to book out to a certain extent, because the best of the news is already there in the price and assuming that they have a complete majority as per the exit polls, we can possibly have one more bump up may be of 150-200 points," he added.

But Baliga is of the view that the pop may not really be worth playing, because in case the final result is different and negative compared to the exit polls, the downside could be huge. So it is better to take that bird which is in your hand than hoping for two in the bush, he said. 

Lok Sabha poll outcome: May 13 will be a bigger event than May 16, say analysts

By Kshitij Anand, ECONOMICTIMES.COM | 6 May, 2014, 01.29PM IST 

NEW DELHI: Although May 16, when election results are expected to come out, is supposed to be a very big and important day for the markets, but analysts feel that the big move in the markets may come in from May 13th onwards when the outcome of the exit polls starts trickling in.

"We have moved higher in the past couple of months with benchmark indices gaining over 6 per cent since March 2014. The basis of this euphoria on the street is the result of opinion polls, predicting a BJP-led government. But will the BJP have a clear and absolute majority remains to be seen," say experts. 

The exit poll data could be used as a proxy or foreshadowing of the actual results on May 16th and investors or traders might start taking action early.

"Whatever is the result of the exit polls, it will start impacting the markets from May 13 onwards. It is also possible that there is some privately carried out exit poll information for their private consumption available to some sophisticated investors," said Dr. Vikas V Gupta (Head- Research & Product Development) at ArthVeda. 

The recent run-up seen in benchmark indices confirms the fact that the markets are pricing in some probability of the BJP-led NDA government at the Centre. If the exit poll numbers are in favour of NDA, there is a possibility of a sharp up-move while a vice-versa situation could be disastrous for the markets, say analysts.

"I agree that 13th May would be a precursor to 16th May Lok Sabha elections results. If the exit poll numbers are in favour of NDA and Narendra Modi, the market will zoom and touch a all-time high on 13th itself," said Rajesh Sharma, Director, Capri Global Capital Limited.

"However, if the numbers reveal the probability of the hung Parliament, then the market will certainly tank by more than 500 points in a day, as the market had been moving up in anticipation of NDA coming to power at the Centre," he added. 

The euphoria ahead of elections results due in mid-May cannot be ruled out in the markets. The Indian markets have got support from strong inflows from foreign institutional investors (FIIs) who are almost certain of a Narendra Modi-led NDA government after the general elections.

Amid hopes of a stable and reform-oriented government after the general elections, foreign investors pumped in Rs 9,600 crore in Indian stocks in April, the eighth consecutive month of inflows, as per latest data. 

Analysts feel the time period between 13th and15th May will be very crucial for the markets and wild swings can be expected on either side. The strong expectations of the BJP-led government and extensive media coverage over exit polls would keep the sentiments positive. However, investors would prefer to hold a certain portion of their liquidity to cover unexpected results.

"Exit poll throws the ball park figure of the next government which the markets would react to immediately. Between 13 and 15th May 2014, the markets would be volatile and react to exit poll results and show a direction going forward," said Siddharth Sedani, Vice President (PMS) at Microsec Capital Ltd.