Stocks to benefit from Modi 3.0 for the next 5 years; Do you own any?

Before the elections, the BJP manifesto emphasized broad-based development through government initiatives with significant socio-economic impacts. Key priorities included infrastructure development, making India a global manufacturing hub, and focusing on capital expenditure (Capex). 

The BJP aimed to strengthen digital and physical infrastructure, empower MSMEs, and provide piped natural gas connections to major cities and towns. 

Prior to the elections, Motilal Oswal Securities reported that the BJP plans to develop India as a key manufacturing hub, focusing on sectors such as Electronics, Defence, Aviation, Railways, and Renewable Energy. 

Their strategy includes strengthening digital and physical infrastructure and empowering MSMEs, with another priority being the provision of piped natural gas connections to all major cities and towns. 

Additionally, Motilal Oswal Financial Services Ltd has a strong outlook on sectors such as Finance, Defence, Roads, Energy, Commerce, and Railways. 

Weak income dynamics at the lower end (a K-shaped economy) might have negatively impacted the incumbent government. The new coalition may be less decisive than the outgoing one, with a potential shift in spending towards rural areas in the near term, according to Nuvama Institutional Equities. 

Meanwhile, Kotak Institutional Equities expects the new government to continue its investment-led economic agenda but may adjust its priorities to support consumption and employment. Analysts will likely have a clearer understanding of these changes in the coming weeks and in the FY2025 final budget. 

“The government may continue focusing on affordable healthcare and housing, energy transition, infrastructure development, and manufacturing. Having already implemented most of the necessary reforms to incentivize private investments, the focus will now be on execution,” stated Kotak Institutional Equities. 

Sharekhan, a brokerage firm, believes that domestic cyclical sectors such as infrastructure, industrials, defence, capital goods, and automobiles will continue to be major beneficiaries. The firm’s portfolio strategy adheres to multi-year investment themes centered around the 3Cs: Capex, Capital, and Consumption. 

For 2024, Sharekhan plans to increase its focus on large-cap stocks while reducing exposure to small and micro-cap stocks. Additionally, the brokerage advises investors to begin accumulating select IT and specialty chemicals stocks.

Under Modi’s third term, Sharekhan anticipates a significant wave of structural reforms, The brokerage envisions these reforms as a crucial part of the roadmap for a developed India by 2047. 

Analysts expect significant policy reforms aimed at improving the Ease of Doing Business to attract foreign direct investment (FDI) and achieve sovereign rating upgrades. These reforms are anticipated to increase government bond inflows due to their inclusion in global bond indices and will encompass areas such as judicial reform, the Uniform Civil Code, land bills, a simplified tax code, and expanding the scope of GST to include more products. 

Furthermore, international brokerage CLSA identifies companies like Larsen & Toubro, IRB Infra, NCC, and J Kumar Infraprojects primarily operating in the construction and capital goods sectors as the main beneficiaries of Modi’s third term in office. 

Motilal’s top large-cap stock picks.

Motilal’s top Mid-cap stock picks.

Written by Omkar Chitnis

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