Modi stocks, Union Budget 2024: NTPC, Cochin Shipyard, IRFC, BEML, RVNL gain up to 3% today. Here's why

Modi stocks, which are perceived as direct beneficiaries of PM Modi’s policies, were in focus on Monday morning. Among them are several stocks from railways, defence and capital goods sectors that were trading higher ahead of the Union Budget 2024 announcements.

Cochin Shipyard climbed 2.63 per cent to Rs 2,742 on BSE. Oil India shares were up 1.92 per cent at Rs 565.65. Ircon International Ltd shares advanced 1.71 per cent to Rs 323.45. LIC shares were up 1.23 per cent at Rs 1,136.90.  Bharat Dynamics Ltd shares added 1.10 per cent to Rs 1,510. Stocks such as NTPC, IRFC, BEML Ltd and NMDC Steel Ltd gained up to 1 per cent.

PSU shares such as MRPL, Hindustan Copper, Nalco, BHEL, Indian Bank, BPCL and GIC RE  declined up to 3 per cent. In total 27 of 59 PSU stocks were trading higher on BSE.

Railways capex is seen increasing 20 per cent growth YoY, with the focus on rolling stock, safety, new tracks laying over coming years against electrification in last decade.

Investors are expecting defence capital outlay to grow at 12-15 per cent YoY, with higher allocation towards UAV/drones, research & development (R&D) and anti-drone systems, noting some key large systems are already in the pipeline.

Stocks such as IDBI Bank Ltd, Shipping Corporation of India (SCI), NFL Ltd and Rashtriya Chemicals & Fertilizers Ltd (RCF) are seen among divestment candidates that are in focus today, as the Finance Minister Nirmala Sitharaman looks set to unveil disinvestment target for FY25 today. The FM had in her interim Budget 2025 set the divestment target at Rs 50,000 crore.

Foreign CLSA had coined the term Modi stocks, which not only included PSUs but several private players such as Reliance Industries Ltd, Larsen & Toubro Ltd and Tata Power Company Ltd, Bharti Airtel Ltd, Bharat Forge and Adani Ports & Special Economic Zone Ltd among others.

Following the election results in June, where the BJP could not achieve simple majority, CLSA said its exposure to Modi stocks was limited to ONGC and Reliance Industries Ltd. The foreign brokerage said it fears de-rating in the expensive discretionary and capex space and preferred the valuation support in private banks.

"In the upcoming Budget, key aspects to monitor include allocations and reforms in railway infrastructure and modernisation, defense spending and procurement policies, and measures affecting public sector undertakings (PSUs), particularly in terms of investments and strategic initiatives. These factors will provide insights into government priorities and their impact on these sectors' performance and market dynamics," said Manish Chowdhury, Head of Research at StoxBox.

Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities said capex outlay numbers are something markets would like to watch out for. The FM Nirmala Sitharaman had announced a provisional capex outlay of Rs 11.11 lakh crore for FY25 in the interim budget.