Markets Gap-Up on Mahayuti’s Big Win: Capex Push and Key Sectors to Watch - Read Now
Indian markets rally as Mahayuti secures a historic win in Maharashtra. Experts see a capex push benefiting BFSI, IT, healthcare, and real estate. Nifty levels to watch: 24,350-24,600 resistance and 23,800 support. Top stocks: SBI, L&T, and Adani Group.
Indian stock markets started the week on a strong note, fueled by Mahayuti’s historic victory in Maharashtra. The win has sparked renewed optimism among market participants, with experts anticipating a significant push in capital expenditure (capex) and an extended rally across various sectors.
Political Stability Spurs Market Rally
Maharashtra and Jharkhand assembly election results have also brought much-needed political stability. BJP's impressive tally of 132 seats in the state, in comparison to just over 100 in 2019, signals a strong mandate. Experts believe this stability will pave the way for effective governance and accelerated infrastructural development.
Political instability for the last five years in Maharashtra undermined the focus on economic growth and policy execution. This decisive mandate will result in renewed focus on governance and effective policy execution, especially in capex and infrastructure projects.
Gap-Up Opening for Markets
Market analysts felt the correction phase of the past two months is very significant. Nifty 50, Nifty Midcap 100, and Nifty Smallcap 100 indices had corrected by 10 per cent. Correction, mainly due to moderate corporate earnings, FII outflows, and global uncertainties, led to a decline.
Ace investor Vijay Kedia says, "The unprecedented victory of Mahayuti has created huge gap in the market, coupled with an oversold position." The index is likely to carry that gap-up opening to some key levels. Here, immediate resistance for Nifty at 24,350 and then further at 24,600 would act as crucial supports while 23,800 would serve as the most important support.
Capex Push to Boost Market Sentiment
Experts would see a considerable boost in capex, which would be propelled by political momentum and improving macro indicators. Gautam Duggad, Head of Research, Motilal Oswal Financial Services observed that government spending on capex had remained flat YoY and declined by 17% in H1 FY25. With elections out of the way, the spending will now accelerate mainly due to improvement in rural economy through strong monsoons and wedding season demand in H2FY25.
This bodes well for areas like infrastructure, real estate, and capital goods as capex spending is likely to experience a second leg up in growth, which could translate into long-term growth.
Valuations Offer Opportunities
As the market corrected, valuations moved to relatively decent levels, especially in large-cap stocks. "Largecaps are seeing decent valuations at 19.3x FY26 EPS, while midcap and small cap are relatively expensive at 30x and 23 P/E, respectively," Duggad said.
We expect earnings growth for Nifty to be 7% in H2 FY25, with ex-commodities earnings up 12% in H1 FY25 and expected to continue similar growth in H2.
Top Sectors and Stocks to Watch
A number of sectors are likely to gain from the renewed capex push and improving sentiment:
1. BFSI (Banking, Financial Services, and Insurance)
Both private and PSU banks, along with non-lending NBFCs, are set to gain from improved credit demand and capex spending. Top picks: SBI, HDFC Bank, and Bajaj Finance.
2. Capital Goods
The sector is poised for growth as infrastructure spending picks up. Companies in this space are expected to benefit from government initiatives. Top picks: L&T, ABB, and Cummins.
3. Real Estate
Political stability and policy continuity can be expected to positively influence real estate development, especially in Maharashtra. Top picks: Godrej Properties, Oberoi Realty.
4. IT and Healthcare
This segment continues its appeal among investors because of the unrelenting demand globally from areas other than the US. The healthcare stock also serves up robustness in a constantly changing landscape. Top picks: HCL Tech, Coforge, and IPCA Labs.
5. Consumer Discretionary and Manufacturing
H2FY25: festival and wedding season likely to drive consumer discretionary goods demand for manufacturing companies. Top picks: Titan, Trent, Amber Enterprises.
6. Stocks of Adani Group
Adani Group stocks are in limelight due to strategic importance and diversified portfolio. Analysts are expecting its stocks to ride the policy favorables and increased investor confidence.
Sector-Specific Insights
Textile: A favorable policy and strong export data are expected to foster growth in the textile stocks and would be one key area to watch.
Infrastructure: Renewed capex focus shall keep infrastructure and its related sectors in focus.
Market Outlook and Key Levels
Market experts believe that the rally is far from over, provided with the reasonable valuations, and positive sentiment around. Key levels to watch for Nifty:
Resistance: 24,350-24,600
Support: 23,800.
Anshul Jain, head of research at Lakshmishree Investments, indicated that the tremendous electoral performance by the BJP has ignited optimism and may propel the Nifty to fresh heights.
Global and Domestic Factors Involved
While internal factors such as political stability and capex push aid the markets, the global trends of reduced geopolitical tensions and stable crude prices also help mitigate. The strengthening dollar and FII outflows remain challenges, but improving corporate earnings and positive policies should balance these concerns.
