Brace for rally if BJP wins 325+, sharp sell-off in bearish scenario: PhillipCapital

As the country goes to the last phase of polling on June 1, 2024, brokerage PhillipCapital has said in the base-case scenario, if the BJP gets 290-300 seats and the NDA alliance wins 330-340 seats, there could be a sharp rally in the equities.

"A bullish scenario of 325+ BJP and 360+ NDA -- this should result in a sharp rise in equities. A bearish scenario -- where the BJP does not secure a majority but the NDA forms a government under the leadership of Narendra Modi as PM -- might lead to a sharp sell-off in equities," the report says.

The brokerage advises that assuming a stable alliance for the next five years under the leadership of Modi, it recommends "buying equities on steep correction". "We do not see any chance of a non-NDA government coming to power," the brokerage adds.

If the NDA comes to power, PhillipCapital says it remains positive on sectors like automation, EVs, defence, railways, logistics, ports, roads, real estate, metals, cement, energy, and financials. "From the long-term and structural perspective, we continue to like cyclicals over consumer space (thesis held since 2.5+ years)."

Among its top picks, PhillipCapital says with one-year perspective, its picks are SBI, BOB, Canara Bk, PFC, REC, Shriram Finance, Muthoot Finance, UltraTech, Siemens, Hero MotoCorp, TVS Motor, Divi's Labs, Syngene, APL Apollo, Jindal SAW, IGL, Aarti Industries, Vinati Organics, Praj, Gokaldas Export (NR), and SP Apparel (NR).

Those with 2-3 year perspective are HDFC Bank, ICICI Bank, SBI, Kotak Bank, Bajaj Finance, Sundaram Finance (NR), MAS Financial (NR), Infosys, HCL Tech, Persistent, KPIT Tech, Rategain, Reliance (NR), GAIL, Ambuja Cements, JK Cement, L&T, Bharti (NR), Sun Pharma, Divi's Labs, Syngene, Coal India (NR), JSW Steel, Jindal Stainless, Maruti, Bharat Forge, Ashok Leyland, Concor, NCC, PNC Infra, Gateway Distriparks, SRF, Aarti Industries, Navin Flourine, PI Industries, Coromandel, Dhanuka Agritech.

The brokerage says the voter turnout is not really a concern as the “average voter turnout” based on the simple average of turnout data released till phase 6 is lower at 65.5% vs 67.4% in the 2019 elections. However, for the same constituencies where voting is completed, based on the absolute voter turnout provided till phase 5, voter turnout is only marginally lower at 66.4% vs. 67.8% in 2019.

The brokerage says the decline in voter turnout is largely unrelated to any single party. “For instance, Congress, the second-highest single party in 2019, saw weaker participation in 73% of its 44 constituencies and YSRCP in Andhra Pradesh saw 55% of its seats seeing lower turnout.”

The INDIA alliance has largely united parties that were not a part of any alliance in 2019, it says. "This has not had any impact on the NDA coalition, except for minor changes in certain state parties. In 2019, the NDA coalition had 353 seats in parliament, which equals 349 seats as per the current alliance. In its present form, the INDIA alliance holds higher seats at 131 vs. 88 in the 2019 elections. If this election’s outcome mirrors 2019’s, the NDA alliance can secure a maximum of 349 seats, unless there are any post-results alliances," the brokerage adds.

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