It’s good to reach 24,000 by December 2024, says Emkay; Betting on small and mid caps versus their larger counterparts

Domestic brokerage firm Emkay Global believes that a third term of the Narendra Modi government is almost certain, with a simple majority for the BJP alone. The brokerage firm’s note came after exit polls said Prime Minister Narendra Modi was likely on his way to a third term.

Emkay believes that macro-financial stability and focus on capital expenditure, investments and manufacturing are expected to support the multi-year rise in the Indian stock market.

While Emkay would revisit its model portfolio after the final results on June 4, the brokerage firm reiterated its preference for industrial, materials and discretionary stocks over financial and IT stocks.

The brokerage also favors small and mid-cap stocks over large caps. Its Nifty50 target was 24,000 for December this year.

Short-term volatility will continue

Emkay believes that despite an immediate rebound in the next 2-3 days, the election result is unlikely to trigger an immediate uptrend in the market.

The BJP’s victory has been largely ignored since December’s parliamentary elections, he notes.

On the other hand, there are near-term challenges: Q4FY24 earnings season was lukewarm and a sustained Chinese market recovery (if it occurs) could challenge earnings flows. REIT.

“We believe the next big trigger for markets will be the budget (on July 24) rather than the elections,” the brokerage said.

According to Emkay, the immediate beneficiaries of a third NDA government are capital goods (railways and defense), housing, tourism and aviation. Textiles and pharmaceutical API are likely winners.

“Valuations, however, pose a challenge for some of these sectors. We remain overweight industrials, discretionary and materials sectors, while financials and IT sectors are the main underweights,” he said.

The BJP Manifesto, according to Emkay Global, gives an idea of ​​what to expect from the third Narendra Modi government.

First, macro-financial stability will be the priority, as it believes it is vital for continued macroeconomic growth and corporate profits.

Second, capital spending will continue, with a focus on roads, rail, affordable housing and green energy.

Third, the government will further encourage domestic manufacturing. It will focus on pharmaceutical APIs and textiles, in addition to automobiles, electric and electronic vehicles, semiconductors, the brokerage said.