By Nikhil Kamat
Narendra Modi led NDA government won the 2019 polls with a landslide victory, the quantum of which very few analysts or exit polls succeeded in predicting. This saffron wave can largely be attributed to the pro-development, anti-corruption sentiment the incumbent government has taken. Indian voter sentiment in the 2014 elections was one of rebellion, with the common man wanting to stand up against dynastic politics and corruption which were the prevalent issues at hand up until 2014. A 5-year term might not be a long enough term to gauge the performance of the current government and the country at large has voted to bring them back to power. Giving them another five years to work on the changes and reforms through which the NDA is trying to uplift the country to achieve inclusive growth, uplifting every class in the country.
Below let’s look at what this could mean for the economy and which sectors are set to benefit most from the incumbent government staying in power over the next five years. Consistency at the top is a big plus for foreign investors, indecision, or a coalition between too many parties could have slowed down policy reforms and caused uncertainty. We can expect more foreign inflows to come into India now since the event is over and at large has played out in the manner that most Foreign investors would have preferred. A win for the NDA could also mean a stronger Rupee and cause yields to drop, this, in turn, would help corporate margins and increase economic activity in the country. Modi government has always pushed banking reforms, more people coming under the banking segment, will aid the banking sector and a whole host of companies which work in parallel or feed of this sector.
BJPs manifesto is focused on infrastructure development; it would be prudent to assume companies in this sector will rally post this win. Agri stocks could also outperform shortly based on the importance placed on all-inclusive growth; the farmer population still forms a significant portion of our nation. Overall, consistency at the top will aid market sentiment, and we expect the markets to rally shortly. Bear in mind valuation are already at levels higher than the mean, making it more expensive to enter the markets at this juncture. Stock picking at this point should be done carefully while making sure one does not go with the flavor of the season and enters sectors where the long term growth story is in place.
The author is Co- Founder & Chief Investment Officer, Zerodha. The views expressed are the author’s own.
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