Nifty can give double-digit returns in 2024 if BJP gets 290 plus seats: Bernstein

Bernstein sees a higher probability of BJP winning around 330-350 seats. "We expect a short-term rally either leading into elections or the week after results potentially breach our 23K target and then a booking as the reality of execution and valuations emerge. In our view, sectors that will lead are Infra, manufacturing, domestic cyclical, a bit of financials, and state-owned enterprises (PSUs) in general. Consumer and IT will lag. Small and midcaps may do better than largecaps for a few days," said Bernstein's Venugopal Garre.

The 100-day agenda of the and expectations from the budget are other events that could play out as support catalysts, Venugopal said, explaining why he is expecting some near-term buoyancy in the equity markets.

"Continuity of power was known to equity markets, which is why we had a rally in Nov/Dec last year - playing again and again on the same theme leads to absurd outcomes for valuations - hence, we believe the focus will eventually return to macro, earnings growth, reasonability of valuations etc. The overanalysis based self-induced stress the markets have seen over the past month is the only reason for the relief rally we call for," he said.

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Bernstein has released a four-case probability scenario on the impact of elections on markets.

1) If BJP wins 290 plus seats - Immediate rally followed by short-term profit booking. High single-digit or low double-digit returns for Nifty this year.

2) If BJP wins 260-290 seats - Mild profit booking near term. High single-digit market returns for this year.

3) If BJP earns 240-260 seats - Moderate to heavy profit booking in near term. High single-digit market returns for this year.

4) If BJP gets 240 seats - Heavy profit booking in near term. Low or negligible returns for markets this year.

"This year's returns would likely stay at high single digits, with a possibility to remain low only in case of a frantic policy shift that can come with a change in government. The expectation building and revisions should continue," the brokerage said while building in the case of continuity of power, with a high focus on capex despite a slowing momentum and push on manufacturing, possibly even higher than we've seen.

With poll jitters giving way to election excitement, Nifty is now within kissing distance of scaling above its previous all-time peak. The market capitalisation of all BSE-listed stocks has already crossed the $5 trillion milestone for the first time ever.

Prime Minister Narendra Modi has exuded confidence of both his party BJP and stock markets making new record highs on June 4.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)