As India awaits Lok Sabha election results, is it a good time to buy largecap stocks on dips? Here is what analysts suggest

As Indian equities continue to trade sideways in Tuesday’s trade after hitting record highs on the previous day and just a week before the outcome of the ongoing Lok Sabha elections due on June 4 (Tuesday), here's how experts and brokerages view Dalal Street and what the suggest.

Suman Bannerjee, CIO, Hedonova, is of the view that ahead of the poll outcome, investors should prioritise building robust, diversified portfolios rather than attempting to time the market or concentrate investments based on recent performance trends. While some suggest booking profits in sectors like PSUs due to election predictions, such strategies are risky given the inherent uncertainties of political and economic landscapes. 

Having a different view, Aamar Deo Singh, Senior VP-Research, Angel One, held that after a spectacular comeback in PSUs, and with the investors’ appetite for the pack on the rise, those wanting a long-term perspective can look at holding onto these positions from a 5-10 year perspective.

However, for those wanting to cash in on these gains, partial profit-booking can be a good option given that both global and domestic markets are likely to witness enhanced turbulence on account of geopolitical tensions, Lok Sabha elections, and the US Presidential elections due in November, according to Singh. 

Further, fresh entry at current levels should be avoided but on any decent correction, these stocks can be added to one's portfolio from a long-term perspective, in a stock SIP mode, Singh noted.

Bannerjee of Hedonova added that predicting election results and their market impacts is notoriously difficult, and trailing returns of specific sectors often have little correlation with future performance, hence investors should spread investments across different asset classes and geographies to mitigate risks and ensure long-term resilience. Investors can better withstand unexpected shocks and avoid severe drawdowns that could significantly impact long-term returns by focusing on diversification and balance rather than short-term gains, Bannerjee added.  

Rajesh Sinha, Senior Research Analyst at Bonanza Portfolio, remarked that looking at election experts and news, it is expected that the BJP-led NDA alliance is going to continue at the Centre for a third straight time and, hence, the reform process taken by the PM will continue post-election. Consequently, investors may remain in the market and use any dip to accumulate to play the strong India story theme, said Sinha.

Recently, Prime Minister Narendra Modi said that the stock market would stage a rally once the election results are out. 

Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, however, cautioned traders. He said trading may prove to be very risky in the near term, advising investors to buy largecaps on declines.

“A high possibility is the market getting a clue of the election results earlier than June 4th. This can happen any time and can trigger a big move in the market.Bank Nifty has the potential to move towards 50000 and go past that level in the event of a sharp rally in the market,” he added. 

In its India Strategy report, dated May 27, JM Financial stated that it expects the BJP to comfortably retain its majority in the ongoing Lok Sabha general elections. 

So, given the policy continuity, the brokerage sees opportunities in defense and capital goods while valuation comfort is offered in private banks and consumers. The brokerage this time in the post-election cycle expects largecaps to outperform as against small and midcaps.