Modi’s Budget to send India’s soaring stocks higher: Survey

The benchmark index has risen 12% so far this year to a record.

A diminished majority for Prime Minister Narendra Modi-led Bharatiya Janata Party in the recent elections has prompted investors to raise bets in the consumer sector on expectations the government will shift toward more populist measures to shore up support. An early monsoon also boosted the prospects for companies involved with crops such as rice, corn and soybeans.
“Corporate earnings for the year gone by had been robust on the back of margin tailwinds and may grow above trend in financial year 2025, keeping India’s medium-term growth story intact,” said Bino Pathiparampil, head of research at Mumbai-based Elara Capital.

Bloomberg

Of those surveyed, 13 projected earnings growth for Nifty components to remain robust, while five others said optimism on future earnings was overdone.

Analysts estimated earnings per share of MSCI India Index’s companies for all of calendar year 2024 to increase 15.6% on-year, data compiled by Bloomberg Intelligence showed. In comparison, Chinese firms are expected to post a 10% rise in their EPS for the same period.

Investors are now turning their attention to the budget, due this month, which will lay out Modi’s policy priorities under a new coalition government. Half of the survey’s respondents expect the administration’s top priority would be a mix of incentives to support consumption while continuing with its capital expenditure push for infrastructure.

But a quarter of them said the capex push would be the government’s main priority. Another quarter thought boosting consumer demand would be on top of their to-do list.

The respondents’ views largely match their expectation that consumer discretionary stocks offered the most promising outlook. Financial and commodities shares were their next favorites.

“The government can please everyone with higher capex, social spending and yet a tighter fiscal,” thanks to larger tax revenue and bumper dividend payout from the central bank, Jefferies Financial Group Inc. strategists including Mahesh Nandurkar wrote in a note on June 24.

The budget will be positive for the sectors related to affordable housing, capex plays, consumer and rate-sensitive businesses, they said.