Exit Polls 2024: Modi-led NDA poised for third term with 350-370 seats; what should investors do next? (2024)

The benchmark indices surged over 3 percent in intra-day deals following the exit polls. The BSE Sensex skyrocketed as much as 2,777.58 points to its record high of 76,738.89 while the Nifty rallied 808 points to its new peak of 23,338.70.

Exit polls suggest the ruling BJP-led NDA is expected to win 350-370 seats in the 2024 General Elections, surpassing expectations. While this projection aligns with the median forecast, it is nearly equivalent to the 353 seats won in 2019 and falls short of the alliance's 400+ target.

Read here: Exit polls 2024 to GDP data - 4 reasons why Indian stock market is soaring

Broader indices as well as all sectoral indices also witnessed a surge in the certainty of the PM Modi-led government winning a third term. The Nifty Midcap index surged almost 4 percent and the Nifty Smallcap index rose 4.3 percent to their respective new highs. Meanwhile, among sectors, Nifty PSU Bank surged the most, over 6 percent, followed by Nifty Oil & Gas, up over 5 percent. Nifty Bank, Nifty Fin Services, and Nifty Metal were also up around 3 percent each.

While the exit polls' forecasts align with pre-poll surveys conducted 1-2 months before the elections, the predictions suggest the NDA will gain seats in South India, Odisha, and West Bengal. Conversely, the alliance may lose a few seats in Bihar, Maharashtra, and Karnataka but is expected to retain its strongholds.

Investors are optimistic about continued economic stability and pro-business policies under Modi’s leadership, which is driving the market rally. The equity market is anticipated to be further energised by these polls, and the government is expected to continue with its economic agenda. The official Lok Sabha election results will be declared on June 4.

Read here: Adani Group stocks surge up to 18% as exit polls indicate Modi win

How will the markets perform going forward and what should investors do next? Here's what market experts and brokerages suggest.

Dhiraj Relli, MD & CEO, HDFC Securities

Markets may, after the initial excitement, wait out for the new path set out by the latest government. If the NDA does not get 400+ seats, some fundamental reforms requiring constitutional amendments may be challenging to implement, but there is still a lot that can be done with this kind of majority.

Sectorally, Infrastructure, BFSI, Capital Goods, Telecom, etc. could be the key beneficiaries, but the forthcoming Budget will shed more light on sectors that could lead the next rally. Above normal monsoon can cheer the rural economy, which may benefit the FMCG sector.

Read here: Indian Stock Market: Exit polls sentimental positive for capex stocks: Jefferies

Kotak Institutional Equities

We find very little value in the market and, in fact, find most sectors and stocks overvalued relative to the fair value of the stocks, with the extent of overvaluation increasing in the inverse order of market capitalisation, quality and risk. Many narrative and PSU stocks are trading at outlandish multiples and are factoring in optimistic volume and profitability assumptions. 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.

Sharekhan

Based on the current unanimous possible outcome of a BJP-led government, we expect domestic cyclical sectors such as infrastructure, industrials, defence, capital goods, and automobiles, to continue to be the major beneficiaries. In the short term, after the election outcome, for the next two weeks, we expect the small & mid-cap space could outperform largecaps, with domestic cyclical sectors and PSUs in focus. After that, in the run-up to the Union Budget 2024-25 (to be presented in the first week of July 2024), there might be a possibility of profit booking with anxiety around tax overhaul, while lagging sectors such as pharma, FMCG and IT would outperform.

Read here: With political stability secured, no worry for the economy: IIFL’s Nirmal Jain

Motilal Oswal

Equity markets displayed some anxiety and nervousness recently around the impending political uncertainty, which resulted in a sharp rise in volatility in Apr and May’24. With this clear verdict, markets will heave a sigh of relief, in our view, and go back to fundamentals/business-as-usual mode.

Our model portfolio remains aligned with the key domestic cyclical themes amid a consistent backdrop of earnings growth. We remain OW on Financials, Consumption, Industrials, and Real Estate. Industrials, Consumer Discretionary, Real Estate, and PSU Banks are our key preferred investment themes.

TOP IDEAS: Largecaps – ICICI Bank, SBI, L&T, Coal India, M&M, Adani Ports, ABB, HPCL, and Hindalco.

Midcaps: Indian Hotels, Godrej Properties, Global Health, KEI Industries, PNB Housing, Cello World, and Kirloskar Oil.

Jefferies

We believe the small-cap and mid-cap stocks (SMID) can take a breather in the new term after a rally led by election results. Moreover, the laggard large-cap stocks are at a good tactical positioning.

Among sectors, we like Real Estate, Industrials, and Power from a long-term perspective. Within individual stocks, private financials like HDFC Bank, IndusInd Bank, and Kotak Mahindra Bank trade at significant discounts. We also like stocks such as Eicher Motors, TVS Motor Company, Coal India, ONGC, and select cement stocks like ACC and Shree Cement.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 03 Jun 2024, 12:04 PM IST