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A new bull phase? Some experts think so

Experts hope for no more disruptions as seen in NDA-1

, ET Bureau|
Last Updated: May 23, 2019, 01.23 PM IST|Original: May 23, 2019, 01.23 PM IST
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n the coming months, the market will closely watch the delivery of promises in the NDA manifesto.
As the benchmark Indian indices scaled new peaks on Thursday morning amid a clear election mandate for the National Democratic Front (NDA) for the second term at the centre, some market experts believe it to be a beginning of a new bull phase. The optimism is backed by the belief that the mandate ensures continuation of the government policies with focus on improving farm income, rural housing, road infrastructure, and a stronger banking system.

“The mandate reduces the risk perception which was built after the results of the recent assembly elections (wherein NDA had struggled to retain power). The market is now breaking out from a multi-year consolidation. It’s a sign of a new bull phase,” Harendra Kumar, MD, Elara Institutional Equities, told ET.

Apart from reducing the uncertainty from the markets, the latest election mandate also points as more visibility on various policy matters since the same government by the NDA will continue at the centre. “Investors will now have one less uncertainty to work upon and may be relieved not to deal with newer or different policy thrust. The results have raised hopes of the issues being faced by the economy being tackled in a firm and prudent way,” said Deepak Jasani, head, retail research, HDFC Securities.

In the coming months, the market will closely watch the delivery of promises in the NDA manifesto. The major focus will be on doubling of farm income, improving housing conditions, travel and tourism, and reducing poverty rate to single digit.

“The electorate has handed the mandate over to NDA because of the work done in hinterlands in the areas of housing, cleanliness, toilet conditions, electricity and road infrastructure. This seems to have echoes well with the voters,” said Amnish Aggarwal, research head, Prabhudas Lilladher. He expects that after the initial euphoria, the focus will shift back to the economic realities and the extent of policy implementation.

The experts expect that the clear mandate will help the government to address pressing issues of liquidity crunch and asset quality of financial institutions. “We expect banks recapitalisation will gain momentum and issues related to liquidity will be addressed effectively. This should give more room to the RBI to reduce interest rates further,” said Harendra Kumar of Elara.

“While the NDA has been seen to be fiscally prudent, the current situation may warrant some clever resource manoeuvring apart from off balance sheet items as large public spend will be necessary to nudge the economy back into action.,” said Jasani of HDFC Securities. Businesses will hope for no more disruptions as seen during NDA-1, he added.

The sectors including consumption and cyclicals will be back on investors’ screens. “Cyclicals could be back in favour being the recipient of public spend benefits. Cement, PSU stocks including Banks, Capital Goods, Realty could remain in favour, others like Consumption could wait for better cues from monsoon and rural income revival,” said Jasani.

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