All 10 so-called "Modi Stocks" are currently down up to 23.16% today as the BJP fails to deliver in terms of elections results as was expected in the recent exit polls. Despite these exit polls predicting a mega win in the 2024 elections, the BJP seems to be edging forward and lead but the opposition I.N.D.I.A. bloc has emerged as a formidable challenger. Though many rounds of counting of polls are yet to happen, the BJP-led NDA is ahead on 295 seats, while the Congress-led INDIA bloc is leading on 226 seats.
The equity market has reacted negatively to the situation, with all 10 of the so-called "Modi stocks" trading in the red. The overall equity market has also crashed with the key benchmarks Sensex and Nifty down 4,213 points and 1,477.90, respectively.
Brokerage major CLSA's last week's report had said that 90% of Modi stocks outperformed versus 42% of other stocks. It said L&T, NTPC, NHPC, PFC, ONGC, IGL, MAHGL, Bharti Airtel, Indus Towers and Reliance were preferred "Modi stocks" for the CLSA analysts.
Today, however, Larsen & Toubro stock is down 11.79% at ₹3,437.95 on BSE, while NTPC shares are trading in the negative at ₹321.05, down 18.09%. State-owned power producer NHPC is down 16.58% at ₹94.35, while Power Finance Corporation is trading 23.16% down at ₹426.40 on the BSE.
Oil and Natural Gas Corporation Ltd is currently trading 19.43% lower at ₹228.85, while Indraprastha Gas Ltd is down 7.95% at ₹431.65 on the BSE. Another PSU company Mahanagar Gas Ltd is trading at 10.45% down at ₹1,236.05 on the BSE. Companies like Bharti Airtel Ltd, Indus Towers Ltd, and Reliance Industries Ltd are all down at 9.27% to ₹1,264.70, 19.37% to ₹293.40, and 8.63% down to ₹2,760.50 on the BSE, respectively.
The CLSA report had also mentioned that a favourable outcome would raise investor confidence in India’s economic growth. "This may encourage investors to play this growth beyond Modi stocks, which are direct policy plays." It said the dominant outperformance of Modi stocks clearly suggested "high expectations of a favourable election verdict for the ruling party being baked-into market expectations".
"From the F&O universe of 183 liquid stocks, we identify 54 companies which are perceived as direct beneficiaries of PM Modi’s policies—half of these are PSUs. Remarkably, 90% of Modi stocks have beaten the Nifty in the election-focused rally over the past six months versus only 42% of the other companies outperforming. This may continue in the case of a strong election result," the report added.
Within this basket of Modi stocks, the preferred BUYs for CLSA India analysts were ONGC, NTPC, NHPC, SBI, Power Finance, IGL and Mahanagar Gas in the PSU space. "Of the non-PSU Modi stocks, CLSA analysts like Ashok Leyland, Ultratech, L&T and the tariff-hike-linked telecom stocks via Bharti Airtel, Indus Towers and Reliance," the report said. Outside Modi stocks, the brokerage likes banks for its growth with HDFC, ICICI, Axis and IndusInd already a part of our India portfolio.
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