1 PSB, 3 Tata group stocks among 21 large, midcap stocks to buy as NDA win seen to fuel risk-on rally

After the landslide victory of NDA in Maharashtra elections, the domestic brokerage Motilal Oswal Financial Services (MoFSL) stated that as the elections in the two states are now behind, it should bring the undercurrents back in the markets.

For Maharashtra, the last five years were characterized by political instability, with frequent musical chairs at work for the CM post. This decisive verdict ends the chronic instability in one of India’s most industrialized and economically important states, added the brokerage report 'India Politics'.

Moreover, the BJP’s strong performance (won 132 seats; majority mark 145) will ensure stability in the governance and bring renewed focus on infra development, underlined the report.

Market perspective

The brokerage held that amid a host of factors including weak Q2 earnings, dollar gains, uncertainty in geo-political landscape as well as continued FII outflow, all the major indices in the last 2 months from the highs recorded in Septenber 27 has corrected steeply. Also, the anxiety around the Maharashtra elections is also behind us with more clarity.

With elections now behind and the BJP getting a strong boost from Haryana and Maharashtra elections, we expect the government to now focus on spending (1HFY25 govt. spending is flat YoY and is down 17% for Capex spending). This poll result, coupled with a recovery in rural spending (on the back of good monsoon and expected strong Kharif output) should improve the demand narrative at the margin. The wedding season in 2HFY25 (30% higher weddings YoY) will also provide a fillip to demand, added the report.

Earnings recovery is also seen with  Nifty earnings expected to grow 7% in 2H vs. 4% in 1H as a mini risk-on rally can be fuelled given a boost in sentiment. 

Given the recent correction, we believe valuations, especially for largecaps, are quite reasonable now at 19.3x FY26E EPS. Midcaps and Smallcaps are still trading at expensive valuations, with NSE Midcap 100/NSE Smallcap 100 trading at a P/E of ~30x/~23x. The volatile geopolitical backdrop and movement in dollar index will be the near term monitorables.

Preferred sectors: BFSI (Private as well as PSU and non-lending NBFC), Capital Goods, Real Estate, Manufacturing, Consumer Discretionary, IT, Healthcare.

Largecap stocks preferred by MOFSL: M&M, SBI, L&T, Indian Hotels, ABB, Dixon, Bharti Airtel, TRENT, HINDALCO, Titan, HCL Tech;

Midcap stocks: ANGEL, BSE, AMBER, IPCA, CUMMINS, PAGE, Godrej Property, COFORGE, JSW Energy, Gravita