What brokerages think about India growth story as BJP falls short of majority in Lok Sabha Elections 2024

Vote counting for the Lok Sabha Elections 2024 is over. The NDA alliance has 293 seats, the INDIA bloc has 234, and others have 16. It is yet to be known who will form the government, but the NDA alliance looks in prime position as of now given its much higher number of seats than the counterpart alliance. But the BJP didn't get majority on its own. It is limited to 240 seats this time, unlike in the 2019 elections, when it had 303 seats. With the BJP not getting majority, some leading global brokerages have started making changes in their Indian portfolios, while others are maintaining their stances, believing that the NDA will form the government sooner or later, and there won't be any impact on the Indian growth story. Some of them, however, are replacing some sectors from others, changing their set of stocks for investors. Here's what leading brokerages such as CLSA, Citi, Bernstein, Macquaire, Goldman Sachs, and Morgan Stanley think of the India gowth story as the BJP is running short of Lok Sabha majority.    

Citi

Citi says that there may be an Impact on valuation due to risk perception.

The brokerage sees downside in capital goods and infra sectors.

It says there is a low risk in NTPC and Power Grid stocks.

The brokerage has preferred Zomato, AXSB, UTCEM, and ITC for investors.

Morgan Stanley

Morgan Stanley says that the BJP is falling short of majority, but its base case is that the BJP-led NDA is likely to form the next government.

That's the reason the brokerage's views for the medium to long term do not change.

Here are Morgan Stanley's two key debates from the election outcome.

Will the pace/direction of reforms become slow/change? Its view is that this is unlikely.

Will the focus on macro stability (which has driven inflation and asset market volatility) that has informed government policy change?

The brokerage says: "The details of the results are still to be analysed, but the prima facie evidence suggests that the BJP's near 60-seat loss from 2019 is largely down to local and non-economic issues. Thus, our base case is that the BJP-led NDA government is unlikely to sacrifice macro stability as its anchor to economic policy."

Goldman Sachs

Even as the NDA has a reduced number of seats, the brokerage says macro stability and growth story remain intact. 

It says a buy weakness and strong earnings delivery will drive returns.

The brokerage sees a 15 per cent earnings CAGR in 2024/25, which it says, should drive market returns.

The brokerage also sees foreign flows to return, given this event risk is behind us now, especially in the light of weak flows so far this year and multi-year low foreign positioning. 

Goldman Sachs stays 'overweight' on India. It favours domestic sectors and raises staples on likely rural support.

CLSA

CLSA has made changes in its portfolio after the BJP did not get majority.

It has replaced L&T with HCL Tech in the Indian portfolio.

The brokerage is asking investors to prefer private banks, IT, insurance, and commodities sectors to invest.

The brokerage is preferring ITC in staples.

CLSA has fear of de-rating due to valuation in discretionary and capex space.

Bernstein

Bernstein, however, has not changed its target of 7-8 per cent return on Nifty after elections results and it has given a Nifty target of 23,500.

The brokerage has an 'overweight' stance on financials.

It is, however, having a cautious stance and is preferring large caps to small and mid caps.

Macquaire

Even as the BJP doesn't get majority, Macquaire sees no clear evidence to support earnings upgrades across sectors. 

It doesn't see FII flows as a support factor.

However, it says that if SIP support doesn't hold, it sees further downside over the next six months.

It has given its large-cap pick choices of HCL Tech, Sun Pharma, HUVR, Hero MotoCorp, and HDFC Bank.