With the results of the General Election just a week away, on June 4, investors are closely monitoring the political landscape, with expectations running high that the National Democratic Alliance (NDA) may register victory for the third time in a row. In a webinar, Manish Sonthalia, Chief Investment Officer of Emkay Global Financial Services, shared his insights on market sentiments, themes that are looking attractive and reforms that may drive the economy and markets going ahead.
The market watcher believes that the benchmark NSE Nifty index may comfortably reach the 24,500 mark by December end if there is no shock in the election verdict. The 50-share index traded at 22,943 in the afternoon trade on May 28.
“For the long term, equity is the best asset class to beat inflation,” he said, adding that there are expectations that the NDA government may get 300 to 330 seats. He also believes that the Nifty could easily achieve 15% earnings growth. Sonthalia further added that BJP securing less than 280 seats could be a negative surprise for the market as a whole.
“Earnings per share expectation for Nifty for FY24 stand at close to Rs 1,000. We see Nifty EPS at Rs 1,150 in FY25 and Rs 1,320 in FY26,” Sonthalia said.
While global issues such as the upcoming US election, geopolitical tensions and crude oil volatility remain pertinent, Sonthalia emphasised the market’s current focus is on domestic factors including the election outcome and the Union Budget. “We do not see any negative surprise in the Union Budget as far as capital gains tax is concerned,” he said.
He advised investors to adopt a balanced investment approach, straddling both large-cap and mid-cap stocks, particularly in sectors such as BFSI, infrastructure and pharmaceuticals, where potential re-ratings and growth opportunities abound.
He also said that a lot of growth is coming into the PSU sector. “There are some of the monopolistic areas like defence and oil marking companies (OMCs) where they have the advantage,” he said.
Anticipating policy continuity, Sonthalia projected potential major reforms in the third term of the Modi government, including land, labour and judicial reforms, which would be closely watched by foreign institutional investors (FIIs). He thinks that seats of 330 or more could trigger inflows from foreigners. FIIs have offloaded shares worth Rs 22,983 crore on a month-to-date basis till May 27, 2024. Earlier, they sold shares of Rs 8,671 crore in April 2024.
In addition to this, he outlined five key themes likely to drive markets going ahead. This includes India’s consumption story which may benefit from rising per capita income, manufacturing, green energy, digitisation and artificial intelligence and financialisation of savings, all of which offer promising prospects for investors.
“We think that platform companies like exchanges, brokerages, bullion dealers and insurers will benefit from the financialisation of savings,” he said.