'BJP-led govt win likely, although market...': Religare Broking's Ravi Singh explains current investor sentiment

Ravi Singh, Senior Vice-President (Retail Research) at Religare Broking, predicts an almost confirmed win for the BJP government. But, the market expert says investor sentiment will be influenced by the number of seats the ruling party secures. If the current government comes to power with a strong majority, a favourable market reaction is expected, Singh told Business Today. Index-wise, Nifty50 has the potential to hit an upside target of 24,200 and Sensex may see a 78,500 level. Traders should focus on sectors like power, railways, defence, renewable energy and automation companies if the present government comes into power.

Singh also highlights that domestic benchmarks could go through "a corrective phase" in the case of a BJP coalition government with NDA support. Here are the edited excerpts from the interview:

BT: What is your reading of the ongoing elections? How many seats do you see incumbent BJP and the alliance NDA winning? What is that the market is pricing in?

Ravi Singh: The formation of a BJP-led government appears likely, although the market sentiment will be heavily influenced by the number of seats they secure. Based on the current market trends, it appears that there is a strong expectation of a BJP victory, which reflects a high level of confidence in their ability to maintain leadership continuity. It is crucial to recognize that regional political dynamics and changes in voter sentiment may bring about uncertainties to these projections.

BT: What could be the market reaction, if a) BJP wins with a thumping majority; b) it comes out with similar results as 2019 (303) or below, but sustains the magical mark; and c) it falls below the majority mark but forms a government with the help of NDA?

Ravi Singh: If the Modi government can secure a strong majority, it is expected to generate a favourable market reaction. In a similar vein, if the 2019 election results were to be replicated, we might see an initial surge in the market, although this could be dampened by certain concerns that may lead to potential corrections. If a BJP coalition government with NDA support comes into play, market sentiments might go through a corrective phase, which could make investors sceptical.

BT: What would be your near-term Sensex and Nifty targets based on the three scenarios discussed above?

Ravi Singh: If the Modi government secures a significant majority, it is possible that the NIFTY50 could aim for 24,200 and the SENSEX could reach around 78,500. In a possible scenario resembling the 2019 election results, the NIFTY50 could potentially reach 23,500 while the SENSEX may hover around 77,000. If a coalition government with the NDA comes to fruition, it is projected that the SENSEX could potentially reach 72,000, while the NIFTY50 could aim for 22,000.

BT: Which stocks or sectors should be on investor radar if the BJP-led government is formed for the third time?

Ravi Singh: Investors might discover promising prospects in sectors like power, railways, defence, renewable energy, and companies focusing on automation, especially if a BJP-led government comes into power. These sectors have the potential to benefit from continued policy support and government initiatives that aim to promote infrastructure development, technological advancement, and sustainable growth.

BT: Where should one be focusing on -- large-cap or midcap and small-cap stocks, after the recent volatility?

Ravi Singh: In times of increased political uncertainty, it is wise for investors to be cautious and focus on stability. Preferring large-cap stocks over mid-cap and small-cap counterparts can offer a more robust investment strategy. By implementing strict stop-loss measures on mid-cap and small-cap positions, you can effectively manage volatility. On the other hand, large-cap provide a higher level of stability.

BT: Do you see FPI inflows coming back to India if BJP is re-elected?

Ravi Singh: The possible re-election of the BJP government could potentially lead to increased Foreign Portfolio Investor (FPI) inflows into India. This could be due to the perception of business-friendly policies and the stability of the current government, which may boost investor confidence and attract more capital into the Indian market.

BT: Do you see PSU stocks from railways, defence and BFSI sectors reacting favourably to election outcome in case of policy continuity? Which among these three pockets do you find value?

Ravi Singh: Certain stocks in the public sector, such as those in the railways, defence, and BFSI sectors, may experience positive market responses after the election, particularly if there is consistency in policies. The defence segment is particularly noteworthy because it aligns with the "Make in India" initiative and defence companies have a significant order book size, which could attract more investor interest.

BT: If you were to pick three large-cap stocks ahead of the election outcome, irrespective of results, what would they be?

Ravi Singh: Considering the election outcome, it may be wise for investors to look into large-cap stocks like HDFC Bank, Larsen & Toubro, and ITC. These companies have solid fundamentals and a wide range of operations. These companies have shown consistent strength and stability, making them well-prepared to handle market changes and take advantage of growth opportunities, regardless of election results.

BT: What are your three mid- or small-cap picks ahead of the election outcome, again irrespective of the results on June 4?

Ravi Singh: Given the inherent volatility associated with mid and small-cap counters before elections, it is important for investors to be cautious. When evaluating companies, it's important to look for those with strong fundamentals and a track record of outperforming benchmarks. These companies can provide potential investment opportunities that offer growth potential and stability, even in uncertain market conditions.