Domestic cyclical and infrastructure themes will out-perform: Dipen Shah

Dipen Shah, Head- Private Client Group Research, Kotak Securities

The BJP, under the leadership of Mr. Narendra Modi, has led NDA to a landslide win - Election 2014. The high vote share and majority number of seats reflect the significant amount of ground the coalition has gained against the UPA and the other regional parties. This is the first time in the past 30 years that, a single party has won the majority in Indian elections. The formation of a stable Government at the centre bodes well for the economy as well as stock markets.

We believe that, the new Government will take steps and measures to take the growth rates higher on a sustainable basis in the long term. We expect steps to increase public investments and encourage private investments in infrastructure, ensure better Governance, reduce Fiscal Deficit (including control of wasteful subsidies), implement structural reforms like GST, DTC, improve Center – State relationships, control inflation by taking effective steps to ease the supply side constraints, etc.

However, we also feel that, it will take measured steps, rather than taking short term steps, as is being hoped by the market. It’s a new dawn; bright sunshine will follow.

The formation of the Cabinet and the 2014-15 budget will be the important events to watch out for.

From the market’s perspective, it is a significant development. We remain optimistic on the long term prospects of the markets. However, in the short term, markets may remain ranged or may even come under some profit-booking, especially after the sharp rise witnessed in the recent past. The outcome was discounted by the markets to a certain extent.

Based on our expectations that, strong reforms initiatives will be taken by the new Government, we continue to expect that, the domestic cyclical and infrastructure themes will out-perform.