'Modi's victory augurs well for economy, relief for markets': Motilal Oswal on exit polls

Motilal Oswal Financial Services (MOFS), in its India strategy note released today, said the victory of PM Modi-led BJP in General Elections 2024, as indicated by exit poll surveys, augurs well for the economy and capital markets. If exit poll surveys are to be believed, the BJP-led NDA is estimated to win 370 seats, up from 353 in 2019. Some surveys have claimed that the NDA will surpassed its "400 paar (400 cross)" target, paving a way for a stable government at the Centre.

This kind of possible outcome provides "stability and continuity" in policy-making, with a single-party majority government, which will be expected to continue pushing its economic agenda, the brokerage major says. Additionally, if the BJP-led government retains power at the Centre for a record third time, the equity markets could witness a sigh of relief, says Motilal Oswal.

Notably, equity markets have been displaying some anxiety and nervousness recently around the impending political uncertainty, which resulted in a sharp rise in volatility in Apr and May’24.

The brokerage says the verdict and consequent political stability and continuity in policy-making will act like icing on the cake and keep India as the cynosure of all eyes. "With this clear verdict, markets will heave a sigh of relief, in our view, and go back to fundamentals/business-as-usual mode. Fundamentally, India is witnessing its own mini-Goldilocks moment with excellent macros (GDP growth of 8.2% in FY24 on the back of ~7% growth in FY23, inflation at ~5%, both current account and fiscal deficits well within tolerance band, stable currency, etc.), solid corporate earnings (Nifty ended FY24 with 25% earnings growth and FY25/26 earnings are likely to post 14-15% CAGR), focus on manufacturing, capex and infrastructure creation, and valuations at 20x one-year forward earnings."

Its model portfolio remains aligned with the key domestic cyclical themes amid a consistent backdrop of earnings growth. "We remain OW on financials, consumption, industrials, and real estate. Industrials, consumer discretionary, real estate, and PSU banks are our key preferred investment themes."

Its top ideas among large caps are ICICI Bank, SBI, L&T, Coal India, M&M, Adani Ports, ABB, HPCL, and Hindalco, while midcaps, its picks remain Indian Hotels, Godrej Properties, Global Health, KEI Industries, PNB Housing, Cello World, and Kirloskar Oil.

What do exit polls predict?

Today’s Chanakya, the only agency that predicted the 2014 seats correctly, has estimated 400 seats for NDA. Axis MY India Exit Poll, the agency that accurately predicted 2019 and also has a track record of correctly predicting 64 out of 69 polls to date, has placed the NDA in the higher range with 400 seats (361-401).

None of the 12 major exit polls have predicted defeat or even a slim majority for the BJP. The lowest number of seats predicted for the NDA is 316 by Dainik Bhaskar, with a range of 281-351.

The dispersion of NDA seats predicted by these 12 exit polls ranges from 316 seats on the lower end to 400 seats on the higher end out of a total of 543 Lok Sabha seats. Within the NDA, the BJP alone is expected to win 325 seats vs. 303 that it won in 2019.

Modi to match Nehru's record?

If the actual election results are in line with the exit polls, it will be the first time since the 1960s that an incumbent Prime Minister is returning to power for a third consecutive term with a comfortable majority. The last time this happened was in the 1960s when Jawaharlal Nehru, India’s first PM, won the Lok Sabha Elections in 1962 (he had also won in 1952 and 1957).

Equally, if the BJP wins 325 seats as predicted in exit polls, this would be an unprecedented performance, say experts. It would have surpassed its previous tally for the second time in a row after winning 282/303 seats in 2014/2019, highlighting the pro-incumbency trend.

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