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Tata Capital > Blog > Generic > Election Impact- Which Sectors to Keep an Eye On


Election Impact- Which Sectors to Keep an Eye On

Election Impact- Which Sectors to Keep an Eye On

The outcome of elections in India significantly impacts the stock market. With the ruling party securing a majority, investors are closely watching how this will affect various sectors of the economy. Investors are constantly thinking about stocks to buy before results or a stock increase after results.

In this article, we will explore the potential beneficiary’s post-election and discuss which sectors or stocks investors should watch. But before we delve into that, let's take a look at the immediate market reaction to the election results.

The Immediate Market Reaction

Following the announcement of the election results, there was a surge in market volatility. The Nifty fell by over 5% in a single day due to concerns about the coalition government's impact on upcoming policies and plans. However, it quickly recovered and gained more than 3.5% in the next two days. This rebound suggests that investors have regained confidence in the market and are optimistic about the future.

Key Sectors to Watch

Following are the sectors to watch out for, which will be impacted due to the election results:

1. Solar Power

One sector that is expected to benefit from post-election policies is solar power. The government's focus on renewable energy and electric vehicles makes solar power an attractive investment opportunity.

Initiatives like the Pradhan Mantri Kusum Yojana are expected to drive growth in rooftop solar installations. If one is thinking about stocks to buy before results, one can consider this sector.

2. Manufacturing

India's manufacturing sector has gained momentum in recent years. Government initiatives like the Production Linked Incentive (PLI) scheme have attracted global attention and domestic investment.

Not only is India becoming a hub for electronics manufacturing, but it is also emerging as a global player in semiconductor production. There will be a stock increase after the manufacturing sector's results.

3. Agriculture

The agricultural sector is another area that is expected to receive increased attention post-election. The government recognises the importance of investing in agriculture and rural infrastructure, especially after a year of low growth in this sector.

Logistics players are likely to benefit from the focus on agriculture infrastructure.

4. PSU Sector

PSU stocks have shown remarkable growth under the current government. Over the last four years, the market value of 52 stocks in the BSE PSU index has nearly quintupled.

In the past six months, all 27 PSU stocks in the Futures and Options (F&O) category have surpassed the Nifty index.

5. Real Estate

The real estate sector, while having faced some hurdles in recent times, presents promising prospects for growth and value. Certain are well-positioned to take advantage of these opportunities, making them particularly attractive investments.

These firms are expected to benefit from a combination of improving market conditions, increased urbanisation, and rising demand for both residential and commercial properties. Investors might find these companies' stocks appealing due to their strong market presence and potential for significant returns.

6. Banks

In the banking sector, large private banks stand out as prime candidates for investment. They are anticipated to experience steady earnings growth and may see an upward re-rating of their valuations.

The banks boast a strong return on equity (ROE) and are expected to benefit from increased private sector capital expenditure (CAPEX). Their robust financial performance and positive outlook for economic recovery make them attractive options for investors seeking stable and potentially lucrative investments.

7. Automobiles

The automotive sector is showing signs of a resurgence, driven by a revival in consumer demand and supportive government policies. Leading companies are positioned to capitalise on this favourable environment.

Manufacturers are expected to benefit from increased vehicle sales and a broader economic recovery. As a result, they offer compelling investment opportunities for those looking to tap into the sector's growth potential.

8. Metals and Mining

The metals and mining sector is experiencing a favourable global trend. Rising demand is driven by industrial recovery efforts, particularly in China, and supply constraints in key markets. This creates lucrative opportunities for investors.

Companies in this sector are poised to benefit from higher commodity prices and increased demand for raw materials. As such, investing in metals and mining stocks could yield substantial returns, making this sector an attractive option for those looking to diversify their portfolios and capitalise on global economic trends.

What Analysts Are Saying?

According to Fitch Ratings, the outlook for India remains positive, with a projected growth rate of 6.2% through FY2028. This indicates that the country's economy is expected to continue its upward trajectory in the coming years.

Divestment plans may take a backseat as the government focuses on working with its allies. Due to political uncertainties, disinvestment receipts for FY2024 were significantly lower than the target. However, projects already approved by the cabinet will proceed as planned.

Other sectors like defence, hydrogen technology, domestic travel, and IT are also expected to witness growth in the upcoming years.

Analysts expect companies in low-cost housing, railways, agriculture, basic food, fertilisers, and agrochemicals to perform well in the next few weeks.

There's also a focus on increasing defence production, boosting railways, and enhancing the banking sector. These areas have outperformed the main market index.

Additionally, the India Meteorological Department's good monsoon forecast has increased confidence in the sugar, fertiliser, FMCG, and auto sectors. Higher rural incomes from good crop yields are expected to boost these companies' profits in the latter half of the financial year.

Wrapping Up

As we look ahead to the future of India's economy and stock market, it is clear that certain sectors will be in focus post-election, and you know which stocks to keep an eye on.

While it's too early to predict the government's next steps, monitoring the developments in infrastructure projects and policies will provide valuable insights for making informed investment decisions.

If you're interested in exploring investment opportunities or need financial assistance for your business during this period of change, Tata Capital can help. Whether you require a loan against securities or funding for your new venture, Tata Capital offers a range of solutions to meet your needs.

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