Mumbai: Brokerages gave a thumbs up to the landslide victory of the Bharatiya Janata Partyled coalition in the just concluded general elections.
The governments focus should now be on affordable housing, removing distress in rural economy, crisis in the NBFC space and recapitalising public sector banks.
Some brokerages, however, believe despite the decisive victory, global concerns such as the US-China trade war and expensive valuation could limit the upside in the market.
ET takes a look at brokerage commentary after NDAs election victory.Bank of America Merrill LynchBofAML said the upcoming Union Budget in July is likely to adopt fiscal deficit at 3.4 per cent of the GDP, which was the target set in the interim budget earlier this year.
The bank expects the government to focus on lowering lending rates and recaptalising PSU banks with excess RBI economic capital.
Political stability also opens the scope for raising foreign exchange reserves via sovereign FX bonds, the bank said.CLSACLSA said that an absolute majority for the BJP would reduce the need for competitive populism though some near term pro-farmer announcements are likely.
CLSA expects a further push for affordable housing.
Potential policy rate cut and a market-friendly ministerial council could be the next market trigger, said CLSA.
However, external factors such as the US-China trade war and rich valuations would mean limited foreign flows, which could cap market returns to single digits, said CLSA.
The brokerage's top stock picks include Aditya Birla Fashion, Godrej Properties, Havells, Lemon Tree, NCC, Ramco Cements, Sadbhav Engineering and Sobha.Credit SuisseEconomic slowdown, NBFC stress and global risks should now be the front and centre of the markets, said Credit Suisse.
The firm expects the government to prioritise judicial reforms, direct tax reforms, administrative changes, more PSU bank mergers, continued infrastructure spending and move forward on labour law simplification.
With the economic slowdown not yet sharp, an intervention from the government to support growth is unlikely, it said.
The brokerage is overweight on banks, including SBI, ICICI Bank, HDFC Bank, and utilities like NTPC and Power Grid.Elara SecuritiesThe government should focus on eradicating farm distress, which is its biggest challenge now, said Ravi Muthukrishnan, head of institutional research at Elara Securities.
The government should prop up consumption, especially discretionary consumption, he said.
NCLT issues need to be resolved and PSU banks need to be capitalised to spur credit growth.
The government needs to do it in such a way that fiscal deficit does not go beyond control, said Muthukrishnan.ICICI SecuritiesThe government needs to focus on the current situation in the economy, particularly the mini-crisis in the NBFC sector and recapitalisation of PSU banks, said Piyush Garg, CIO, ICICI Securities.
Any laxity on the fiscal front will have medium-term implications on the other macro factors, added Garg.
The government needs to focus on the issues in the NBFC sector and PSU banks going forward rather than big-bang reforms, he added.Morgan StanleyMorgan Stanley expects the inflation framework, fiscal consolidation, infrastructure spending, FDI focus and strong external affairs policies to continue.
The firm said new administration may bring some changes such as increasing cash transfers to the poor, more emphasis on portfolio flows, focus on India's external trade and social constitutional reforms.
The firm sees the market focus shifting to the growth cycle and domestic flows returning with strength.
Morgan Stanley has set a June 2020 target for Sensex at 45,000.
Apollo Hospitals, AU Small Finance Bank, Chalet Hotels, Edelweiss Financial, Gujarat Gas, Indian Hotels, Jindal Steel, Just Dial, Oberoi Reality, Sobha are its top stock ideas.NomuraUnlike the BJP's first term, where prudence came at the cost of growth, policy priority in the second term will be to reignite growth with prudence as secondary priority, said Nomura.
The brokerage expects a mix of rural reflationary policies, infrastructure spending, tax simplification and social investment.
Reforms to ease of doing business are also likely, said Nomura.
The brokerage expects the government to retain its interim budget fiscal target of 3.4 per cent of GDP for the current fiscal.
ICICI Bank, Axis Bank, Container Corporation, LT and SBI Life its top picks.