Bulls favour infra, PSU stocks ahead of polls

Old favourites such as consumer goods, IT and pharma shares losing sheen

Gripped by pre-election frenzy, Indian markets seem to be factoring in a possible victory for the Narendra Modi-led Bharatiya Janata Party (BJP). In sync with the hope rally fuelled by exit polls suggesting a BJP lead, stocks in beaten-down sectors such as capital goods, infrastructure, financials and public sector undertakings (PSUs) have surged since February this year. Most analysts believe this rally has more legs and are optimistic about a stable government at the Centre after the polls. In the run-up to the elections, Business Standard has listed key themes and stock picks of leading brokerages. (EXPERT TAKE  THE TOP PICKS IN A PRE-ELECTION SCENARIO AND WHY)

Analysts are betting on capital goods, infrastructure and financials as their top picks ahead of the elections. PSU stocks have been in high demand given that the BJP-led National Democratic Alliance manifesto includes addressing key issues facing these companies. On the other hand, erstwhile market darlings such as consumer goods, information technology and pharma sectors are expected to lag behind the broader markets in terms of returns. While large-caps have led the rally so far, analysts believe mid- and small-cap stocks could also catch up soon. However, if the election outcome misses Street expectations, experts believe the markets could witness a strong correction.