Published on: May 27, 2024
The General Election 2024 in India is a fundamental event with significant implications for the stock market. The market has been buoyant as the election approaches, with new all-time highs recorded. Key indices like Nifty CPSE and Nifty PSE have led the way with impressive gains of 39.37% and 37.82%, respectively, as of May 24, 2024.
With the market showing a bullish trend, the potential benefits of a BJP victory are becoming more apparent. Six sectors, namely Railways, PSU Banks, Oil and Gas, PSE and CPSE, Power, and Defence, could substantially grow if the BJP wins the election.
To gauge the medium-term trend for these sectors, a Definedge Equal Weighted Index has been created, utilising the Point & Figure Weekly charts with a 1% X 3 methodology. This technical analysis approach helps identify trends and potential movements in these sectors.
The market’s short-term reaction may be influenced by the number of seats won by the BJP. However, the focus here is on medium-to-long-term trends, anticipating sustained growth and positive performance in these sectors based on continuing current policies and initiatives.
1. Railways
If the BJP is re-elected, the railway sector could see significant growth. The government’s focus on modernising and expanding the railway infrastructure, including high-speed rail projects, station redevelopment, and increasing freight capacity, could gain further momentum. Key initiatives such as the Dedicated Freight Corridor (DFC) and bullet trains could see accelerated progress. This could increase revenue for railway construction, technology, and services companies, enhancing efficiency and connectivity.
Defiendge Railways EQW Chart
2. PSU Banks
Public Sector Undertaking (PSU) banks have been a focus of the BJP government’s reforms over the past years. The government’s efforts to consolidate and strengthen PSU banks through recapitalisation, improving governance, and enhancing digital banking infrastructure are expected to continue. The re-election of the BJP might accelerate these reforms, leading to improved asset quality, better financial health, and increased lending capacity. This could result in higher profitability and market performance for PSU banks, providing a stable and potentially lucrative investment opportunity for investors.
Nifty PSU Bank Index
3. Oil and Gas
The oil and gas sector is another area that could benefit significantly from a BJP victory. The government has promoted policies to increase domestic production, improve infrastructure, and ensure energy security. Additionally, the focus on transitioning to cleaner fuels and expanding the usage of natural gas could drive growth for companies in the oil and gas sector.
Definedge Oil & Gas EQW Index
4. PSE and CPSE
Public Sector Enterprises (PSEs) and Central Public Sector Enterprises (CPSEs) have shown strong performance in anticipation of the elections. The BJP government has been pushing for greater efficiency and profitability in these enterprises through strategic divestment and improved management practices. Continued governance under the BJP might see further disinvestment, unlocking value in these enterprises and making them more competitive and profitable, positively impacting their stock performance.
Nifty PSE Index
5. Power
The power sector stands to gain from sustained reforms and investment under a BJP-led government. The focus on renewable energy, power grid modernisation, and efforts to achieve 24/7 power supply across the country are critical components of the government’s agenda. Schemes such as the Ujwal DISCOM Assurance Yojana (UDAY) have aimed to improve the financial health of power distribution companies, and further initiatives could enhance sector efficiency and reliability. Companies involved in conventional and renewable power generation, transmission, and distribution will likely benefit.
Definedge Power EQW Index
6. Defence
The defence sector is poised for significant growth if the BJP wins the 2024 elections. The government has been emphasising the indigenisation of defence production through initiatives like Make in India and the Defence Production and Export Promotion Policy (DPEPP). Increased defence spending, modernisation of armed forces, and a focus on self-reliance in defence manufacturing are expected to drive growth in this sector. Companies involved in defence manufacturing, technology, and services stand to gain from increased contracts and investment.
Defindege Defence EQW Index
7. Infra and Realty
The infrastructure and real estate sectors are crucial areas likely to grow substantially under a BJP-led government. The government’s focus on large-scale infrastructure projects, including roads, highways, ports, and urban development, aligns with its broader economic goals. Schemes like the Smart Cities Mission, Bharatmala, and Pradhan Mantri Awas Yojana (PMAY) have been pivotal in driving growth in these sectors. Continuing these initiatives and new projects would likely boost demand for construction materials, technology, and real estate development. Infrastructure development, construction, and real estate companies are expected to benefit significantly from sustained government spending and policy support.
Nifty Infra Index
Nifty Realty Index
Conclusion
If the BJP wins the 2024 General Election, the sectors of Railways, PSU Banks, Oil and Gas, PSE and CPSE, Power, Defence, and Infra and Realty are expected to rally and exhibit strong performance. Continued reforms, investment, and policy support under the BJP government could drive growth and profitability in these areas, making them attractive opportunities for investors and traders looking to capitalise on medium-to-long-term trends.
*Chart Source: Zone-Web