“If the current government retains majority, as exit polls suggest, it adds wings to the strong sector outlook,” Jefferies said in a report, adding that power and defence linked capex have the highest visibility.
Top picks among industrials include L&T, Hindustan Aeronautics (HAL), Siemens, ABB, Data Patterns, Thermax and KEI. Jefferies’ target price of Rs 4,135 on Data Patterns signals an upside potential of up to 33% from Monday’s closing price.
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Given the Modi government’s huge push, stocks related to capex have been on top of investor radar.Earlier, Nomura had said the order inflows and expansion in EBITDA margins in capital goods and defence surprised on the upside, indicating strong demand and pricing power.While the government’s agenda likely to be guided by the manifesto, analysts see scope for new priorities, such as urban housing, urban infrastructure, maritime both commercial and defence, drones both agriculture and defence, efficiency capex in the power sector, new energy, especially with a focus on green hydrogen and solar power, scaling up of nuclear power, tourism, skills development, rail freight and logistics coming into fore.Domestic cyclical sectors such as infrastructure, industrials, defence, capital goods and automobiles are likely to remain major beneficiaries. “In the short term, after the election outcome, for next two weeks, we expect the small & mid-cap space could outperform large caps, with domestic cyclical sectors and PSUs in focus,” says Sharekhan.
Confident that equity will outperform significantly as an asset class, investors are following multi-year investment themes based around the 3Cs of Capex (Infrastructure, Capital Goods & Real-estate), Capital (Banks & Financials), and Consumption (Discretionary Spending).
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)