Sensex gains over 3,000 points in two sessions. Time to buy, sell, hold?

While the rally on Friday of 1,961-points was mostly led by positive global cues amid some buying in Adani group shares, the up move on Monday was triggered by the outcome of Maharashtra polls

It has been a good run for the markets in the last two sessions with the S&P BSE Sensex surging over 3,200 points in two sessions.

 

While the rally on Friday of 1,961-points was mostly led by positive global cues amid some buying in Adani group shares, the intraday up move on Monday of over 1,300 points was triggered by the outcome of Maharashtra assembly elections that saw Mahayuti Alliance retain power amid a thumping majority. Positive global cues also aided sentiment.

 

Here’s how leading brokerages have interpreted the development and their investment strategy in this backdrop.

 

Motilal Oswal Securities

 

Politically, this verdict will strengthen the ‘BRAND MODI’ after a small setback in the Lok Sabha 2024 elections. Winning a big state like Maharashtra in such a dominating fashion indicates some strategic course correction by NDA.

 

The government is now likely to focus on spending. We also expect modest recovery in corporate earnings in the second half of fiscal 2024-25 (H2-FY25). The change in sentiment can initiate a mini risk-on rally.

 

Valuations, especially for large-caps, are quite reasonable now at 19.3x FY26E EPS. Mid-and small-caps are still trading at expensive valuations, with NSE Midcap 100/NSE Small-cap 100 trading at a price-earnings (P/E) of around 30x / 23x.

 

The volatile geopolitical backdrop and movement in dollar index will be the near-term monitorables. Preferred sectors include BFSI (Private as well as PSU and non-lending NBFC), Capital Goods, Real Estate, Manufacturing, Consumer Discretionary, IT, Healthcare.

 

Axis Securities

 

Maharashtra verdict will bring political stability for the next 5 years and is likely to boost investors' confidence towards policy continuity going forward. After the recent correction, we believe the market is in the oversold zone and valuations appear reasonable. This is the best time to act, and shift gears to build a long-term portfolio.

 

The much awaited correction has already happened and most of the stocks are available at reasonable valuations as compared to what was available three months ago. We recommend building stocks that offer ‘Growth at a Reasonable Price’ (GARP) in the next one year.

 

Kotak Institutional Equities

 

Indian equity markets will get a short-term boost in sentiment, which may arrest the ongoing correction in the broader markets. As such, retail flows, which have been the bedrock of post-Covid Indian markets, may continue to remain supportive. Valuations of the broader Indian market continue to remain at elevated levels, notwithstanding the recent derating in headline indices. Markets may continue to be tested in the coming weeks, post the likely sentiment-related near-term bump.

 

The central government continues with its approach of incremental reforms, as the bulk of the heavy lifting has been done already. The focus is likely to be on ramping up capex, which is running significantly behind targets and finishing the plethora of ongoing projects.

 

The strong electoral performance, coupled with the lack of any major state elections in the near term, is likely to rule out any fiscal stimulus from the center. However, while the central fiscal may continue to improve, an increasing shift toward populism in states may gradually weigh on India’s consolidated fiscal deficit.

 

Antique Stock Broking

 

The recent market correction (prior to the run up seen in the last two sessions) has provided a good opportunity to accumulate stocks within investment-linked themes given the receding political risk, minimal scope of earnings downgrade in 2H, reasonable valuation, and global macro uncertainties largely priced in.

 

Emkay Global

 

Freebie/populist schemes are here to stay given their electoral success. The Mahayuti Alliance win bodes well for Maharashtra, as consolidated Centre + state politics should allow a pick-up in stalled infra development and other pending issues.

 

However, both states will see higher fiscal pressure from increased spending on financial assistance for women, and states’ FY25 FD/GSDP is likely to slip to 3.15% (FY25BE: 3.0%) on aggregate, with sharp cuts in capex to keep deficits under control.