In anticipation of Prime Minister Narendra Modi’s hat-trick in the Lok Sabha election, a basket of companies potentially that can benefit from favorable government policies is gaining traction today. The “Modi stocks” category is dominated by PSUs.
The market capitalization of PSUs as a proportion of overall m-cap has risen to 17% from 14% in the previous election year. The historical 20-year average is 21%, showing that PSU stocks have plenty of ability to increase from their current levels.
Moreover, Monday’s session saw the BSE PSU index close over 8% higher, with power and bank companies outperforming. But it isn’t the first time. In the 2014 election, the PSU index rose 82% in 10 months, whereas in 2019, PSUs increased by 18% in 7 months.
Furthermore, on both occasions, PSU stocks reached their peak a few weeks following the election results in June. Analysts expect this to happen in June or July, before the July budget.
Modi stocks benefit directly from present and anticipated policy actions from Modi 3.0, particularly in domestic cyclical sectors like as infrastructure, industrials, military, manufacturing, capital goods, and electricity.
Modi stocks in the PSU universe include the likes of HAL, Bharat Electronics, HPCL, GAIL, REC, Power Grid Corporation, SBI, Container Corporation of India, PNB, NTPC, SAIL, etc.
Here are a few PSU stocks that can see a significant surge after election results:-
Hindustan Aeronautics Ltd
Hindustan Aeronautics Limited is an Indian firm that designs, develops, manufactures, repairs, overhauls, upgrades, and services a wide range of goods such as airplanes, helicopters, aero engines, avionics, accessories, and aerospace structures.
Within this space, defense stock Hindustan Aeronautics showed a weak margin performance in the March quarter. However, Jefferies believed that the margin will grow significantly, so the brokerage has given a target of Rs 5,725 apiece which is a 16% upside from Tuesday’s price of Rs 4,927.75 per share, as per Economic Times reports.
Bharat Electronics Ltd
Bharat Electronics Limited provides electronic equipment and systems to both the defense and non-defense industries. Its defense products include navigation systems, communication systems, land-based radars, naval systems, and electronic warfare systems, among others.
REC Ltd
REC Limited is an India-based infrastructure finance business. The Company’s offerings include interest-bearing loans to state electricity boards, state power utilities/departments, and the private sector for all aspects of power infrastructure.
GAIL (India) Ltd
GAIL (India) Limited is an Indian natural gas processing and distribution firm. The company’s segments include Transmission Services, Natural Gas Marketing, Petrochemicals, LPG And Liquid Hydrocarbons, and Others. Its Transmission Services sector covers natural gas and liquefied petroleum gases (LPG).
Written by:- Abhishek Singh
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