PSU stocks, which soared on Monday, dropped sharply today as the actual vote count differed from exit polls predicting a clear win for the BJP-led NDA in the 2024 Lok Sabha election.
Today, the BSE PSU index fell by nearly 16%, closing at 18,964 points. REC, PFC, and Bharat Heavy Electricals saw losses of up to 25.19%. In total, 52 stocks in the index ended the session with losses between 10% and 20%.
PSU and capital goods stocks have been rising due to initiatives like Make in India, increased capital expenditure, and efforts to revitalize the banking sector. However, political uncertainties have shaken investor confidence, causing today’s sharp decline.
Current vote counts suggest that Prime Minister Narendra Modi’s alliance might win but with a smaller margin. This could mean running a coalition government, raising concerns about delays and compromises in policy decisions, unlike the past decade of BJP-led governance.
Narendra Modi is likely to return as Prime Minister, but he will need to work with regional allies like Telugu Desam and Janata Dal (Secular), adjusting policies accordingly. There’s a slim chance the opposition could form the government if some BJP allies switch sides, but this is seen as unlikely by Emkay Global Financial Services.
Market outlook: Emkay predicts a short-term market decline due to increased risks. They advise against investing in PSU and capital goods sectors for now, expecting a resurgence in consumption, especially in FMCG and value retail, with a positive outlook for healthcare.
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