Infra, State Firms Big Winners As Lok Sabha Exit Polls Predict NDA Win

A third term for PM Modi is seen by some investors as bolstering economy and markets as the promise of policy continuity attracts global capital

Infra, State Firms Big Winners As Lok Sabha Exit Polls Predict NDA Win

Stock benchmark NSE Nifty 50 Index jumped as much as 3.6% on Monday.

Shares of state-run companies and infrastructure-related firms are standing out as exit polls predict a landslide victory for Prime Minister Narendra Modi's ruling party.

Citigroup Inc. and Jefferies Financial Services Inc. see manufacturing and electric vehicles among other the key winners if exit polls translate into a similar result for the Bharatiya Janata Party when votes are counted June 4. 

A third term for PM Modi is seen by some investors as bolstering economy and markets as the promise of policy continuity attracts global capital. While stock traders are positioning themselves for sectors that will likely benefit from the election outcome, bond markets will keep an eye on government finances and the July budget.

Stock benchmark NSE Nifty 50 Index jumped as much as 3.6% on Monday to a new intraday record. Indexes for infrastructure and state-owned firms on the NSE also rose sharply to their all-time highs in early trading in Mumbai.

The rupee and bonds gained. The currency strengthened by the most since March 2023 to 82.9725 against the dollar, according to prices compiled by Bloomberg.

Here's what market participants are saying:

Surendra Goyal, a strategist at Citigroup Inc.

"We expect the government to retain focus on infrastructure, manufacturing, energy and electric vehicles through reforms, budgetary allocations, and policy incentives." 

"Stocks positively exposed to the focus on infrastructure and manufacturing growth would gain."

Santanu Sengupta, senior economist at Goldman Sachs

"On balance, most clients we met with in recent months appeared to infer that political continuity would contribute to a stable macro-economic environment and continuing reforms." 

"A narrow current account deficit, and adequate FX reserves means that the rupee offers resilient carry in a 'stronger for longer' dollar world, among most EMs. Additionally, inflation is back within the RBI's target range, and a consolidating fiscal deficit (from high levels) means that IGBs, that are soon to be included in the JPM EM bond index, remain an attractive source of low-vol yield for fixed-income investors. We continue to recommend long 2-year IGBs and short EUR/INR, and our equity strategists continue to see further upside in equities."

Mahesh Nandurkar, strategist at Jefferies Financial Group Inc.

"A cyclical upturn is underway in private capex, and political stability alongside, continues to make us like capex plays (real estate, industrials, power) from a long-term perspective. However, a tactical breather is likely."

Vishnu Varathan, chief economist Asia ex-Japan at Mizuho Bank

"Elections admittedly stole the thunder, but the wider economy has bragging rights to a hat trick of its own too."

"A trio of stellar growth outrun, S&P's positive outlook upgrade and a third Modi term, with all its promises of policy continuity aimed at pack-leading growth from infrastructure and make-in-India boost. All of which are likely to stoke India bulls."

Michael Wan, senior currency analyst at MUFG Bank

"We expect risk assets to rally, India government bond yields to grind lower, and the rupee to strengthen in the immediate aftermath, notwithstanding RBI's likely hand in intervening to cap INR strength."

"We remain reasonably constructive on INR and forecast the USD/INR at 82 by calendar year-end. A stronger mandate for the incumbent would give us more confidence on our constructive view."

Sanjeev Prasad, co-head of institutional equities at Kotak Securities

"We expect the equity market to be further energized by the polls (although the numbers are similar to pre-poll surveys) and the government to continue with its economic agenda."

"A large BJP victory may sustain rich-to-bubble multiples in parts of the market (automobiles, capital goods, PSUs) for longer, but we would be surprised if many of the lofty embedded expectations come to fruition."

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