The Aryavarth Express
Agency (New Delhi): A potential third consecutive term for Indian Prime Minister Narendra Modi is anticipated to significantly boost shares of defence, infrastructure, railway, and capital goods companies, according to Raamdeo Agrawal, chairman and co-founder of Motilal Oswal Financial Services.
“These were areas where the government has focussed on, invested money. High probability that the ruling government will continue. If they return… they’ll go (with) much more vigor,” Agrawal stated on Saturday. He predicted major governmental actions in these sectors over the next five years.
India’s general elections, which have spanned several weeks, are concluding on Saturday, with ballots set to be counted on June 4. Opinion polls suggest that Modi’s Bharatiya Janata Party (BJP) is likely to return to power, although concerns about the margin of victory persist due to low voter turnout.
Analysts view a shock defeat for Modi as unlikely but caution that an unclear mandate could trigger a market correction similar to the one experienced two decades ago. Following the 2004 election results, the benchmark Nifty 50 index plummeted 17% over two sessions when the then-ruling BJP-led coalition lost despite expectations of retaining power.
Throughout his two terms, Modi has prioritized improving India’s infrastructure and enhancing domestic manufacturing, particularly in the defence sector. The government has proposed a record $133 billion in infrastructure spending for the 2025 financial year. Over the past 12 months, shares of leading defence, infrastructure, and capital goods companies have surged between 64% and 480%, outperforming the Nifty 50’s approximately 25% increase.
Agrawal warned that a lack of a clear mandate for the ruling party could result in a sharp market correction due to high expectations for policy continuity. Additionally, he pointed out that potential changes to the capital gains tax regime in the post-election budget could adversely affect the market.
“The issue of capital gains tax tweaks is definitely there on the table. The government has not denied it. It is a major unknown,” Agrawal noted.
As India awaits the election results, market participants remain vigilant about the potential impacts on the economy and key sectors driven by governmental policies and spending initiatives.
