Where is share market headed in May amid Lok Sabha elections? Investors pin hope on Modi win

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Published: May 8, 2019 4:31:21 PM

The Indian stock markets are heading for a positive momentum in May after rallying in March and April on the back of hopes that the ruling BJP would come back to power for another five-year term and strong FIIs flows, said Kotak Securities in a report.

stock market live update on 8 may 2019Investors pin hopes on ruling BJP to regain power in 2019

The Indian stock markets are heading for a positive momentum in May after rallying in March and April on the back of hopes that the ruling BJP would come back to power for another five-year term and strong FIIs flows, said Kotak Securities in a report. The FIIs have been net buyers in the month of April. The total net investment made by FIIs in April stood at Rs 16,728 crore. In the month of March also the FIIs were the net buyers.

The Indian stock markets seem optimistic about the current government retaining power in 2019, which would augur well for fixing the structural reforms in the country. Kotak Securities expects the BJP-led NDA coalition winning 270-310 seats, ahead or around the mid-way mark of 272 seats. This is up from the brokerage firm’s earlier prediction of 225-232 seats, made in January.

However, the report also said that the election results will have less bearing on the state-level reforms which are also very relevant as the state-governments account for two-thirds of the combined revenue and expenditure of central and state governments.

The macroeconomic fundamentals also seem to favour the market in the current financial year FY 20. The brokerage firm expects strong GDP growth in FY 20 at 7.1% with low inflation, mild depreciation in rupee with manageable current account deficit (CAD) with possible downside risks, better balance of payments, and new investment cycle with coming of the stable government at the centre. Expectation of normal monsoons and improving corporate confidence and capex along with improvement in earnings also seem to be supportive for the markets, according to Kotak Securities.

“We continue to believe that the MPC would cut the repo rate by another 25 bps in 1HFY20, more likely in August as some of the uncertainties around elections, monsoon, crude prices and consolidation in fiscal situation would have partly abated by then,” Kotak Securities said in the report.

It did not rule out the global risks arising from tighter global monetary conditions, higher-than-expected crude oil prices and increasing trade tensions between the two economic giants US and China.

Kotak Securities has recommended “BUY” for the stocks of banking, industrials and upstream companies in the oil sector. While in the banking sector, it has recommended , ICICI, HDFC Bank, Axis Bank and SBI, among industrials, it has preferred L&T, Cochin Shipyard, Sadhbhav Engineering and others.It is also positive on upstream oil companies GAIL and ONGC amid rising oil prices and has recommended “BUY” for them.

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