'Multi-year bull run in stock market': What Emkay Global says on BJP win, smallcap stocks, Nifty target

Following the exit polls that indicate a comfortable win for the BJP-led NDA in Lok Sabha elections 2024, Emkay Global said it sees near-certainty of a third term for the Narendra Modi government with a simple majority for the BJP on its own. The domestic brokerage said the macro-financial stability and focus on capex, investments and manufacturing should sustain the multi-year bull run in the domestic stock market. 

While the brokerage would revisit its model portfolio after the final results on June 4, it reiterated its preference for industrials, materials and discretionary over Financials and IT. It also favours smallcap and midcap stocks over large cap shares. Emkay Global's Nifty target stands at 24,000 for December 2024.

The BJP Manifesto, Emkay Global said, gives some perspective on what to expect from the third Narendra Modi government.

First, the macro-financial stability will be prioritised, which is seen vital for continued macro growth and corporate earnings.  Second, the capital expenditure will continue, with roads, railways, affordable housing, and green energy in focus. Lastly, the government will push domestic manufacturing further. "It will emphasize pharma API and textiles in addition to Autos/EVs and electronics/semiconductors," Emkay noted. 

"An immediate-term rally (next 2-3 days) notwithstanding, the election result is unlikely to trigger an immediate uptrend in the market. The BJP win has been largely discounted since the Assembly elections in December. On the other hand, there are some near-term challenges – the 4QFY24 earnings season was lukewarm and a durable China market turnaround (if it happens) could challenge FPI flows. We believe that the next big trigger for the markets would be the budget (in July-24) rather than the elections," Emkay Global said.

The brokerage said the immediate beneficiaries of a third NDA government are capital goods (railways and defence), housing, tourism, and aviation. Textiles and pharma API are probable winners, it said.

"Valuations, though, are a challenge for some of these sectors. We remain overweight on Industrials, discretionary, and materials, whereas financials and IT are the key underweights. We will revisit our model portfolio after the final results are announced on Tuesday," it said.