Market Post Lok Sabha Elections: FMCG, IT, and Healthcare Stocks to Watch as PSU and Railways Fall Short

Many expected Prime Minister Modi to secure a third term with a clear majority, which would have boosted the Indian economy and stock market. Analysts had predicted strong performance from PSU, defence, railways, and renewable energy stocks post-election. However, the results did not meet expectations, leaving the BJP reliant on the NDA alliance to form a government, causing some investor concerns.

Which Sectors to Watch Post-Elections?

Emkay Global’s Advice:

• Move from PSUs and capital goods to FMCG stocks.
• Emkay Global suggests that with Modi returning as PM under different circumstances, the economy’s general direction won’t change, but reforms and privatization might stall. They recommend switching investments if the Nifty drops below 20,000.

Julius Baer’s Perspective:

• Rupen Rajguru from Julius Baer India believes IT and healthcare will outperform capital expenditure-oriented sectors.
• Defensive sectors like FMCG, IT, and healthcare are expected to do well in the near term, while sectors like PSUs, defense, and railways might see a dip from their high valuations.

Mehta Equities’ View:

• Prashanth Tapse advises focusing on defensive and non-government-driven sectors like FMCG, telecom, and pharma.
• Tapse also notes the importance of the upcoming budget and earnings reports on market movements.

How to Trade in the Indian Market Post-Elections?

Tapse mentions that market volatility is expected in the short term as the NDA-led BJP forms the government for the third time. It’s advisable to wait for the market to stabilize after the unexpected election outcome.

Advice for Investors:

• Be cautious with momentum stocks and small-cap stocks that have performed well over the past two years. A market correction could trigger a sell-off in these areas, warns Vaibhav Porwal, Co-founder of Dezerv.
• However, Porwal suggests that a significant market drop without fundamental changes should be seen as a buying opportunity. He believes that investors should take advantage of such dips for fresh equity investments.

Long-Term Outlook:

• Rajguru maintains a positive outlook on financials, autos, real estate, and select industrial/manufacturing companies.
• Porwal points out that a coalition government is not necessarily bad for the economy, noting that from 1989 to 2014, India saw significant GDP growth under coalition governments. He believes that the market’s initial reaction to the election results was a knee-jerk response and expects stability as the new government takes shape.

Investors are advised to shift focus from PSUs and capital goods to sectors like FMCG, IT, and healthcare. Defensive and non-government-driven sectors are expected to perform better in the current market environment. Caution is advised with momentum and small-cap stocks, but dips in the market could present buying opportunities.