Reliance Securities in its latest strategy note said the pre- and post-election rallies have been strong and there is a possibility of time-wise corrections in the key stock indices over the next few months. The domestic brokerage said state elections ahead would be important for the BJP-led coalition government. Elections in the US, it said, would be keenly followed by export-driven IT, pharma and other allied sectors.
The consensus news flow for now is revolving around likely tweaks to long-term capital gains tax (LTCG), changes to derivatives market expiries of the indices and an increase in lot value of individual stocks, which could trigger a knee-jerk reaction in the market from an immediate point of view. But eventually the indices should find their rhythm back as earnings and liquidity push Nifty to 26,000-plus level by December 2024, Reliance Securities said.
Among sectors, analysts noted that road projects awarded (in kilometers) by the Ministry of Road Transport & Highways were down 30 per cent in FY24 and NHAI project announcements also slowed to a trickle in FY24. In contrast, railways did relatively better in terms of new project announcements in FY24, which suggests that there is potential for higher capex allocation to railways in the forthcoming Budget, Nirmal Bang Institutional Equities said. "Indigenisation of defence and defence exports may also receive a push," it added.
Reliance Securities sees higher allocations towards railways and power, which could lead to increased infrastructure order conversions. Reliance Securities also sees significant opportunities in roads, airports, seaports, waterways and logistics. That said, the brokerge is cautious of sectors such as railways and defence post recent rally.
"The key outperforming sectors such as defence, railways and EMS are trading at multi-year or all-time high valuations, led by order inflows and positive sentiment. We expect some time and price correction into these sectors from current levels, as focus would move to underperformance sectors, which may play a catch up over the next few months," Reliance Securities said.
The brokearge has come out with a list of seven stocks, which it believes offer earnings growth and specific qualitative and quantitative triggers, which can help them outperform and create alpha returns over the next few months, as the market hits record high ahead of the Union Budget 2024.
They are Larsen & Toubro Ltd, SRF, AU Small Finance Bank Ltd, Tata Technologies Ltd, Devyani International Ltd, The Ramco Cements and ZEE Entertainment Enterprises Ltd. The domestic brokerage believes one can buy these stocks for 15-22 per cent upside going ahead.