A host of PSU stocks from sectors such as railways and defence, and themes such as housing, aviation and tourism will be in focus on Monday morning following exit polls results that hinted at 350-plus seat wins for the BJP-led NDA. A BJP win on June 4 with strong mandate would signal policy continuity and help capex-linked sectors sustain high valuations, market experts said.
"The immediate beneficiaries of a third NDA government are capital goods (railways and defense), housing, tourism, and aviation. Textiles and pharma API are probable winners. Valuations, though, are a challenge for some of these sectors. We remain overweight on industrials, discretionary, and materials, whereas financials and IT are the key underweights. We will revisit our model portfolio after the final results are announced on Tuesday," said Emkay Global.
Motilal Oswal Financial Services said it remains overweight on financials, consumption, industrials, and real estate. Industrials, consumer discretionary, real estate, and PSU Banks are our key preferred investment themes. State Bank of India, Larsen & Toubro Ltd, ICICI Bank Ltd, Mahindra & Mahindra Ltd, Coal India, ABB India, Adani Ports, Hindalco Industries and HPCL are some of its largecap picks. The brokerage prefers stocks such as Indian Hotels, Global Health, Godrej Properties, KEI Industries, PNB Housing, Cello World and Kirloskar Oil among midcap names.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities said he is positive on railways and defence stocks. "PSU gains will be sustained, and selective stocks will continue do well. One can't paint all PSU stocks with same brush. We like defence and railways. Power stocks will also be in greater focus but their valuations are already factoring in most positives."
Sharekhan in a note, ahead of exit polls, said it prefers PNC Infratech, Adani Ports and L&T from the infrastructure sector. It likes ABB Ltd, Siemens Ltd, Thermax Lt, Cummins and Kirloskar Engines and BHEL from capital goods sector. Among cement shares, it prefers JK Lakshmi Cement and UltraTech Cement. Sharekhan preferred Bank of Baroda, SBI, Punjab National Bank (PNB) and Bank of India among PSU banks. Sunteck Realty, DLF and Arvind Smartspaces were its top real estate picks.
Modi stocks were recently in focus after foreign brokerage CLSA came out with a strategy note. In that report, the foreign brokerage identified 54 out of 183 liquid stocks, which are perceived as direct beneficiaries of the Modi government's current policies. Half of them were PSU shares.
Within the basket of Modi stocks, its preferred buys were ONGC, NTPC, NHPC, SBI, Power Finance, IGL and Mahanagar Gas in the PSU space. "Of the non-PSU Modi stocks, CLSA analysts like Ashok Leyland, Ultratech, L&T and the tariff-hike-linked telecom stocks via Bharti Airtel, Indus Towers and Reliance," it noted.