Modi Win a ‘Turning Point’ for Politics, Reform: Street Wrap

(Bloomberg) — Prime Minister Narendra Modi’s bigger-than-expected win in Uttar Pradesh state elections is positive for Indian equities and raises his odds of coming back with a majority government in 2019, analysts say.

CREDIT SUISSE (Neelkanth Mishra)

• Election result is a political turning point as it helps BJP in presidential polls, signals declines in identity politics
• Brings good governance back as a political imperative
• Upper House prospects improve; opposition more likely to support legislative action for a while
• State limitations seen hard to overcome quickly; years before poll results led changes show up in earnings

KR CHOKSEY (Deven Choksey)

• Modi may push reforms including electricity, roads, building up of rural and social infrastructure
• Will have positive influence on decisions Donald Trump will take in maintaining relationship with India
• India may attract more than $50b of portfolio flows in FY17-18, which would drive markets higher to newer levels
• Nifty could rise to 9,200 first and then settle down in the range of 8,750 to 9,500
• Sectors that will outperform in 2017: financials, auto & ancillaries, commodities, industrials
• Potential stock picks: UPL, Tata Motors, SBI

OPC ASSET SOLUTIONS (Ajay Bagga)

• Indian markets are at the cusp of a sustained mega bull run; great visibility of policies for next 7 years
• Big boost will come from targeted subsidies, public infrastructure spending, liberalized FDI, a shift from unorganized to organized players
• Recovering global macro, stable Indian economy is a positive mix even at high valuations
• Rural consumption themes, suppliers of consumer financing, suppliers to infrastructure and power sectors, staple and durable consumption sectors will benefit
• Top sectors financials, auto, FMCG, cement, power equipment suppliers and durables companies

EDELWEISS (Kapil Gupta)

• Increases Modi’s chances of coming back to power with full majority in 2019
• Election win along with improving global growth, should keep markets buoyant
• Maintain overweight in cyclicals, IT and metals

TCG GROUP (Chakri Lokapriya)

• Implementation of populist measures announced in polls such as farm loan waiver, free laptops, zero interest loans, free LPG connections can hold back economic recovery
• Hopes Modi’s zeal to cultivate his new target vote bank of poor and working class doesn’t lead to price and product controls on corporates

• NOTE: Earlier, Modi Win Spurs Jump in Indian Stock Futures, Rupee Forwards