Its a gap-up! Mahayuti’s thumping victory in Maharashtra add momentum to markets – Experts to watch out for capex push

The verdict of the state assembly elections are out. Both Maharashtra and Jharkhand saw the existing Governments being voted back to power and most importantly, BJP’s seat count has increased to 132 in Maharashtra compared to just a tad above 100 in 2019. All of this ties-in well with the positive global cues coming and signals the rally continuing for the markets. Experts believe that the stage is now set for renewed focus on capex.

The last 5 years in Maharashtra were characterized by political instability with frequent musical chairs at work. With this verdict, the political stability will surely bode well for effective governance and infra development.

Political momentum likely to push markets higher

Markets have had a decent correction in the last two months with Nifty/Nifty Midcap 100/Nifty Smallcap 100 correcting by 10% on the back of moderate corporate earnings in H1FY25, relentless FII selling since October 24. Most market experts belief may be the indices are finally moving past the correction zone and are watching out for significant positive momentum following the recent downtrend.

Given the current market condition, ace investor, Vijay Kedia pointed out to “a huge gap due to unprecedented victory of Mahayuti and oversold position.”

Gautam Duggad, Head Of Research, Director – Institutional Equities at Motilal Oswal Financial Services pointed out that “With elections now behind and BJP getting a strong boost from Haryana and Maharashtra elections, we expect the government to spring into action and start the spending. H1FY25 Govt spending is flat YoY and is down 17% for capex spending. This coupled with recovery in rural spending on the back of good monsoon and expected strong Kharif output should improve the demand narrative at the margin. Wedding season in the H2FY25 (30% higher weddings YoY) could also provide a fillip to demand. So both capex and consumption can see some bounce-back.”

Anshul Jain, Head of Research at Lakshmishree investments added that “The BJP’s thumping victories in Maharashtra and Haryana are set to spark a bullish sentiment in the Indian stock market. This political stability is likely to lead to a gap-up and the rally could extend to 24350-24600 levels, driven by increased investor confidence.”

Valuations reasonable- Key Nifty levels to watch

In the last two months, almost, FIIs have sold $17 billion and this coupled with geo-political uncertainty and and strengthening dollar weighed on market sentiment significantly. Soft earnings in H1 further added to the subdued sentiment. However, it appears to be significantly more cheerful now.

Duggad explained that “Given the recent correction, valuations, especially for large-caps is quite reasonable now, in our view, at 19.3x FY26 EPS. Midcaps and small caps are still trading at expensive valuations – with NSE Midcap 100 and NSE Smallcap 100 index at 30x and 23 P/E. Nifty earnings are expected to grow 7% in H2. Ex-Commodities, Nifty earnings are up 12% in H1 and should be similar in H2 as well. MOFSL ex commodities earnings were up 13% in H1 and should have 13% again in H2FY25.”

“Key levels to watch for Nifty include immediate resistance at 24350 and further at 24600, with support around 23800 to cushion any profit booking,” added Jain.

Top sectors and stocks to watch now

The political scenario in the last couple of months has led to rather muted capex growth. However, the street is now expecting a renewed push and that is likely to keep infra stocks in focus. Duggad’s preferred sectors include “BFSI (Private as well as PSU and non-lending NBFC), Capital Goods, Real Estate, Manufacturing, Consumer Discretionary, IT, Healthcare. The preferred stock ideas have M&M, SBI, L&T, Indian Hotels, ABB, Dixon, Bharti Airtel, Trent, Hindalco, Titan, HCL Tech amongst large caps and Angel, BSE, Amber, IPCA, Cummins, Page, Godrej Property, Coforge, JSW Energy, Gravita in the midcap space.”

Jain added that “Adani Group stocks should be in sharp focus, given their strategic importance and diverse portfolio. Additionally, the textile sector is expected to attract renewed interest, benefiting from favorable policies and strong export data.

Investors should keep an eye on these sectors for potential opportunities, leveraging the positive market sentiment driven by political stability and policy continuity.”