Fears around a repeat of UPA victory in 2004 is making stock market investors nervous, as such an unexpected event, exactly two decades ago, had resulted in 15 per cent cut in Sensex in a single day! Dubbed as Black Monday, Sensex had crashed over 15 per cent on May 17, 2004, its biggest ever percentage fall ever.
To be sure, the base case market expectation still is BJP winning of its own, with outside support of NDA partners. But if the Indian National Congress (INC)’s INDIA alliance makes a surprise win, it would lead to derating for the domestic stock market, said Prabhudas Lilladher adding that sectors such as defence, capital goods, tourism, PSU banks, drone makers, AMCs, wires and cables and plastic pipes, among others taking a hit.
The domestic brokerage said the ongoing election is “most hotly contested” in history, with narrative along NDA falling short of a majority or INDIA alliance coming to power are buzzing, at least in social media and global press.
PL said investors have been nervous from past couple of weeks and sustained volatility in run upto June 4 seems likely.
BJP-led NDA government
PL said a continuation of policies, if NDA comes back to power, could mean themes around infrastructure, defence, capital goods, new energy and tourism etc will continue to do well. Consumer, two-wheeler and tractor stocks can get a boost from green shoots in rural demand and expectations of normal monsoons, it said.
INC-led INDIA government
PL said INDIA alliance coming to power will de-rate markets and specific sectors such as defence, capital goods, tourism, PSU’s (including banks), drone makers, AMCs, wires and cables, plastic pipes and EMS.
“We believe sectors like FMCG, Retail, 2W, PV (entry level), tractors, real estate, logistics (Ecom centric) and consumer durables will benefit from expected policies. We believe Post Lehman trade of a shift towards FMCG, private banks, IT services, healthcare and auto can again come to the fore, albeit including ground realities around current global and technology scenario,” PL said.
PL said if IINC-led INDIA comes to power, below stocks or sectors would be in focus:
FMCG: Rural demand revival will get a boost if supplemented by Freebies. Key stocks include Hindustan Unilever (HUL), Dabur India, Emami Ltd, Marico Ltd, GCPL, Britannia and Varun Beverages.
Auto: Two-wheeler, tractor and entry level cars will benefit. Key stocks – Hero MotoCorp, Maruti Suzuki India and Mahindra & Mahindra (M&M.
Healthcare: Defensive such as Sun Pharma, Cipla, Max Health and Jupiter could be key beneficiaries.
IT services: More of a global play with very limited impact. Key stocks – TCS, LTI Mind tree, HCL tech, Cyient, and Tata Tech
Private Banks: De-rating of all PSU’s including banks. Focus may shift to top rung private banks, which are already trading at significant discount to their last 10 year P/ABV. Key stocks – HDFC Bank, Kotak Mahindra Bank, Axis Bank and ICICI Bank.
Capital Goods: While many segments in EPC, defence, new energy are at risk.
“We believe global technology leaders like Siemens, ABB, Schneider, Honeywell, Elantas Beck, GE T&D, Hitachi Energy, Timken, Schaffler etc. are likely to suffer much less impact. Hindalco, Havells India and Telecom companies like Bharti Airtel will not be impacted,” PL said.
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