NDA's Major Victory in Maharashtra: What It Means for Markets, Infrastructure, and the Economy
The BJP-led NDA's overwhelming win in Maharashtra is expected to boost investor confidence, infrastructure development, and economic stability, according to a recent MOFSL report.
NdaMaharashtra ElectionsStock MarketsInfrastructure DevelopmentEconomyReal Estate MaharashtraNov 25, 2024
The impact of this victory on investor sentiment is already evident. The NSE Nifty 50 index traded 1.61% higher at 24,292 in the afternoon trade on November 25, 2024. According to Palka Arora Chopra, Director of Master Capital Services, the clear mandate given to the NDA government is likely to accelerate infrastructure projects, benefiting sectors such as construction, real estate, and manufacturing.
MOFSL, in a report released on November 24, emphasized that the BJP's strong performance will ensure stability in governance and a renewed focus on infrastructure development. But why is Maharashtra so important in this context?
Maharashtra holds a significant position in India’s economic landscape. It is the second-largest state in terms of Lok Sabha seats, with 48 seats. The state contributes around 13-14% to India’s GDP and has a per capita income 30% above the national average. It also plays a crucial role in exports, holding a 16% share in total exports from India. Additionally, Maharashtra leads the country in start-up recognition, accounting for 19% of all start-ups recognized by the Government of India and is at the forefront of Foreign Direct Investment (FDI) inflows.
Despite recent declines in the Nifty 50, Nifty Midcap 100, and Nifty Smallcap 100 indices—down around 9%, 9%, and 8%, respectively, over the past two months—due to moderate corporate earnings, foreign institutional investor selling, geopolitical tensions, and a strengthening dollar index, the election results are expected to bring a positive shift.
MOFSL predicts that with the elections behind and the BJP receiving a strong boost from Haryana and Maharashtra, the government will focus more on spending. Government spending in H1FY25 has been flat year-over-year and has declined by 17% for capex spending. The positive poll results, combined with a recovery in rural spending (driven by a good monsoon and strong Kharif output), should improve demand. The wedding season in H2FY25, with a 30% increase in weddings year-over-year, is also expected to boost demand.
The brokerage anticipates a modest recovery in corporate earnings in the second half of FY25. The change in sentiment could trigger a mini risk-on rally. Given the recent market correction, valuations, especially for large caps, are now more reasonable at 19.3x FY26 EPS. However, midcaps and small caps remain overvalued. The volatile geopolitical environment and the dollar index’s movements will be key factors to monitor.
MOFSL prefers sectors such as BFSI, capital goods, real estate, manufacturing, consumer discretionary, IT, and healthcare. Among large caps, it is bullish on M&M, SBI, L&T, Indian Hotels, ABB, Dixon, Bharti Airtel, Trent, Hindalco, Titan, and HCL Technologies. In the broader market, it is positive on Angel One, BSE, Amber Enterprises, Cummins, IPCA, Page Industries, Godrej Properties, Coforge, JSW Energy, and Gravita.
In summary, the NDA's victory in Maharashtra is a significant win that is likely to positively impact investor sentiment, accelerate infrastructure projects, and contribute to economic stability and growth.
Frequently Asked Questions
What is the significance of the NDA's victory in Maharashtra?
The NDA's victory in Maharashtra is significant because it ensures stability in governance and a renewed focus on infrastructure development, which can boost investor confidence and economic growth.
How did the NDA perform in the 2024 Maharashtra elections?
The NDA alliance won 233 out of 288 seats in the 2024 Maharashtra elections, marking the best performance by any party or alliance in the state since 1990.
What sectors are expected to benefit from the NDA's win in Maharashtra?
Sectors such as construction, real estate, manufacturing, BFSI, capital goods, consumer discretionary, IT, and healthcare are expected to benefit from the NDA's win in Maharashtra.
How has the Nifty 50 index responded to the election results?
The Nifty 50 index traded 1.61% higher at 24,292 in the afternoon trade on November 25, 2024, in response to the NDA's victory in Maharashtra.
What is the economic importance of Maharashtra for India?
Maharashtra is the second-largest state in terms of Lok Sabha seats, contributes 13-14% to India’s GDP, and has a per capita income 30% above the national average. It also holds significant shares in exports, start-ups, and FDI inflows.
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