The staggering victory of the ruling National Democratic Alliance (NDA) alliance in Maharashtra may positively impact investor sentiment, especially in infrastructure, urban development, and manufacturing sectors aligned with BJP policies. The NDA (Mahayuti) alliance swept the Maharashtra elections by a huge margin, winning 233 out of 288 seats, way ahead of the highest exit poll prediction. This is the best-ever performance by any party or alliance in Maharashtra since 1990. The BJP has bettered its previous high of 122 seats won in the 2014 state elections. The benchmark equity index NSE Nifty 50 index traded 1.61% higher at 24,292 in the afternoon trade on November 25, 2024. “With a clear mandate, the government is likely to push forward with infrastructure projects, a key focus of the BJP, which would benefit the construction, real estate, and related sectors,” said Palka Arora Chopra, Director of Master Capital Services. MOFSL, in a report on November 24, said that the BJP’s strong performance will ensure stability in governance and bring renewed focus on infrastructure development. Before going ahead let’s understand why Maharashtra is important. In Lok Sabha, Maharashtra is the second-largest state with 48 seats. It contributes the largest to overall GDP in India at 13-14%. It has a per capita income 30% above the national average, and holds a 16% share in total exports from India. Maharashtra also has the highest share (19%) in start-ups recognised by GOI at an all-India level and has remained at the top position in FDI inflows in India. Of late, the benchmark Nifty 50, Nifty Midcap 100 and Nifty Smallcap 100 indices declined around 9%, 9%, and 8%, respectively, in the nearly two months due to moderate corporate earnings in the first half of FY25, selling by foreign institutional investors, ongoing geopolitical tensions and a strengthening of dollar index after the victory of Donald Trump in the US election. “With elections now behind and the BJP getting a strong boost from Haryana and Maharashtra elections, we expect the government to now focus on spending (H1FY25 government spending is flat YoY and is down 17% for capex spending). This poll result, coupled with a recovery in rural spending (on the back of good monsoon and expected strong Kharif output) should improve the demand narrative at the margin. The wedding season in H2FY25 (30% higher weddings YoY) will also provide a fillip to demand,” MOFSL said. The brokerage also expects a modest recovery in corporate earnings in the second half of FY25. “The change in sentiment can initiate a mini risk-on rally. Given the recent correction, we believe valuations, especially for large caps, are quite reasonable now at 19.3x FY26 EPS. Midcaps and Small caps are still trading at expensive valuations. The volatile geopolitical backdrop and movement in the dollar index will be the near-term monitorables,” MOFSL said. BFSI, capital goods, real estate, manufacturing, consumer discretionary, IT and healthcare are among the preferred sectors of MOFSL. On the other hand, it is bullish on M&M, SBI, L&T, Indian Hotels, ABB, Dixon, Bharti Airtel, Trent, Hindalco, Titan, HCL Technologies in the large cap space. In the broader space, the brokerage is positive on Angel One, BSE, Amber Enterprises, Cummins, IPCA, Page Industries, Godrej Properties, Coforge, JSW Energy and Gravita.