ICICI Bank, ITC, SBI, Coal India: What Motilal Oswal says on Modi 3.0; stocks that it prefers

Motilal Oswal Securities said the domestic stock market will keep a watch on the outcome of Lok Sabha elections, as they would have a significant bearing on the short-term market behaviour. Two pre-poll surveys by India Today and Times Now predict a more than comfortable majority (272-plus seats) for the incumbent Bharatiya Janata Party (BJP), giving Prime Minister Narendra Modi a third consecutive term.

While India Today’s Mood of the Nation Poll predicted that the BJP-led National Democratic Alliance (NDA) to win 335 out of the total 543 Lok Sabha seats, with the BJP alone expected to win 304 seats, Times Now’s Lok Sabha Pre-Poll expects NDA to lead with 366 seats.

To recall, the stock market was anxious in the run-up to the state elections in December 2023 and their potential bearing for the Lok Sabha elections in 2024. For the last twenty years now, those state elections have historically been touted as semi-finals before the general elections. The incumbent BJP’s comfortable victory in three out of four states soothed the market’s nerves and resulted in a sharp rally, with 8 per cent Nifty returns in December, Motilal Oswal said.

"The two pre-poll surveys further strengthen market sentiment as they indicate political continuity with a single-party majority government under . Modi for a third consecutive term. The government’s confidence of retaining power in the forthcoming elections is also reflected in the FY25 vote-on-account Budget, when it refrained from giving any tax cuts/freebies while aiming for better-than-expected fiscal consolidation with a fiscal deficit target of 5.1 per cent for FY25E," it said.

The brokerage said that a third term for BJP will also augurs well for policy momentum in India, which, at the moment, is seeing confluence of good macros and micros.

"Valuations at 19.2 times FY25 EPS for Nifty are well within its long-period average even as broader markets remain expensive, with the NSE Midcap 100 index trading at a 40 per cent premium to the benchmark Nifty50. In the midcap index, several midcap stocks in the industrials, power, defence, PSU sectors are trading at a significant premium to their long-period-average valuations," it said.

The broking firm has a preference for industrials, consumer discretionary segment (including jewellery and hotels), PSU banks, NBFC, real estate and healthcare sectors.

Among largecaps, Motilal Oswal Securities like stocks such as ICICI Bank Ltd, State Bank of India (SBI), Larsen & Toubro Ltd (L&T), HCL Technologies Ltd, Titan Company, Coal India Ltd, Mahindra & Mahindra (M&M), Zomato Ltd, GAIL, ITC Ltd and Cipla.

In the mid and smallcap segments, it prefers Indian Hotels Co Ltd, HPCL, Godrej Properties Ltd, Dalmia Bharat Ltd, Angel One Ltd, IIFL Finance Ltd, PNB Housing Ltd, Sobha Ltd, Lemon Tree Hotel and Restaurant Brands Asia.