Bharatiya Janata Party (BJP) Retained power in four states – Uttar Pradesh (UP), Uttarakhand, Goa and Manipur, according to the results of the state elections announced on Thursday. After the election, Jefferies believes the government’s policy action may again intensify.
“We are confident that the government may push for privatization in the next few months. The sale of Air-India at the end of 21st was a pre-cursor for the same and the government is now likely to pursue privatization of oil major BPCL, select PSU banks and other PSU properties/lands in the coming months. Political success should also mean that there should be no visible change in the direction of government spending in favor of infrastructure,” the global brokerage said in a note.
Revision of fuel prices has been put on hold since early November 2021 and oil marketing companies (OMCs) need a sharp jump in retail prices to restore normal marketing margins.
A rise in retail fuel prices in the next few days could be positive for OMCs. In addition, privatization candidates such as BPCL, Concor, BEML, SCI and IDBI may see some positive news flows, Jefferies said.
As the results are in line with expectations and exit polls predictions, equity markets will move on more important aspects like Russia-Ukraine geopolitical conflict, US Fed rate hike, rise in crude oil prices in the near term. RBI’s response to rising inflationary pressures in the economy.
Motilal Oswal expects the stock market to remain volatile till the current adverse conditions subside. “However, valuations for Nifty at P/E ~19x FY23E EPS seem relatively more reasonable,” it said.
Even with policy consistency, the election results are unlikely to have much impact on the direction of the markets, and experts will focus on how policymakers reduce the economic cost of the geopolitical quagmire.
“As we analyze the macro impact of higher energy prices, we understand that the situation is still fluid. However, with Brent possibly averaging $100/bbl in FY23, this could push inflation to above 5.6%, CAD-to-GDP ratio may indicate above 3%, and growth below 7.5%.However, our preliminary valuation suggests overall Nifty profits to be quite resilient in this negative scenario, with Auto/Cement/ There is scope for reduction of around 30%/20%/10% in overall FY23E PAT of consumer stocks in Nifty,” said brokerage Emkay.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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