Election Countdown, focussing on the General Elections)
BJP finds new partners: As we get closer to the elections, political parties are stitching together alliances to help their electoral prospects. The BJP seems to be ahead in the race, reinforcing its image of being the frontrunner in the polls. It has also belied some apprehensions that Narendra Modi being at the helm would prevent allies from joining the party. Key alliances formed by the BJP include
(i) Bihar (LJP, RLSP), (ii) Tamil Nadu (5 parties), and
(iii) Haryana (HJC). It is also likely to announce an alliance in Andhra Pradesh with TDP, as per media reports.
The Congress, meanwhile, has formed an alliance with the RJD in Bihar, but has been unable to form any alliance in West Bengal, Tamil Nadu and Andhra Pradesh where it traditionally had alliances.
The BJP-led NDA now has a foothold in almost all major states except Kerala, Odisha, and West Bengal where the BJP continues to remain weak. This would make BJP-led NDA a serious contender in about 425 seats out of the 543 seats.
Will Tamil Nadu alliance get seats for BJP led NDA Last week, the BJP announced a major alliance in the southern state of Tamil Nadu where the BJP has been traditionally a fringe player. The BJP has managed to form an alliance with five other parties in the state namely, DMDK, PMK, MDMK, IJK, and KMDK. As per the last general elections, this alliance of six parties had a vote share of about 23% in Tamil Nadu vs. AIADMK at 23%, DMK at 25% and Congress at 15%. While most opinion polls have so far given very few seats or no seats to the BJP in the state, this big alliance could likely surprise in favour of the NDA.
Bihara three-cornered contest: Bihar will now witness a three-cornered contest. Congress has tied up with its traditional ally, Laloo Yadavs RJD. But its third partner, LJP headed by Ram Vilas Paswan, has crossed over to the BJP. The entry of LJP in the NDA fold is particularly pleasing for BJP since LJP was part of the NDA in 2002 and had left in protest against the 2002 riots. Meanwhile, Nitish Kumars JDU will be fighting independently in Bihar after having withdrawn from the NDA alliance late 2013.
Sector & stock strategy
Our model portfolio continues to be a mix of (i) rupee sensitives (software and pharma), (ii) domestic economic plays, like autos, private banks and reform plays, like government oil companies and (iii) small exposure to deep cyclicals, which include beaten-down infra names and government banks. A strong government will lead to a bigger tilt toward domestic plays, while a weak coalition will lead us to a tilt toward software and pharma names.
Top Buys: ICICI Bank, Lupin, Maruti, TCS, ONGC