More upside in markets if poll results in line with expectations: CLSA

Foreign brokerage CLSA said on Friday that the market will continue to see an upside if election results are in line with expectations.

Most opinion polls have indicated that the BJP-led NDA will retain power in the ongoing elections.  

“Equity markets already factor in this possibility partially, as reflected in improved foreign and domestic flows,” said the brokerage.

Benchmark indices have rebounded 11 per cent from 2019 lows to scale new lifetime highs on the back of $9 billion of foreign inflows. The Sensex and Nifty on Thursday touched new record highs on intra-day basis, however, the indices gave up all the gains to end marginally lower ahead of a long weekend.

“Active portfolio allocation changes in favour of India haven’t happened in any meaningful way as yet and more market upside is likely if the final election result is in line with opinion polls,” said CLSA in a note.

The Lok Sabha elections 2019 commenced on April 11 and will continue till May 19 through seven phases for 543 seats. The second-phase concluded on Thursday.

CLSA says any correction in the market due to poll related uncertainty could be a buying opportunity.

“Broader economic growth and corporate earnings outlook would not likely change much with the election outcome and hence any potential large market correction due to political reasons would be a buying opportunity,” it said.

“While different political parties have a broad-level policy consensus, manifesto analysis shows that Congress’ poll promises might intensify fiscal pressures and raise inflationary expectations,” CLSA added.

In its manifesto, the Congress has announced a minimum guarantee scheme, termed as Nyay, where in it has promised to transfer Rs 72,000 a year to the bottom 20 per cent of the population. The scheme is estimated to cost around 1.7 per cent of the GDP to the exchequer.

CLSA has said housing is a theme investor can look at irrespective of who comes to power.

ICICI Bank, Axis Bank, IndusInd Bank, HDFC, Godrej Properties, Ramco, ITC, Reliance Industries, ONGC and NTPC are among the top picks for the brokerage.

The election counting will take place simultaneously for all the 543 seats on May 23. The results should be known the same or next day.