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Expect a One-Man Show if Narendra Modi becomes PM: Motilal Oswal

Indian stock markets are taking a breather after rallying to record highs on hopes of a stable government post elections. The Sensex and Nifty have been rangebound over the past few trading sessions, perhaps waiting for electoral verdict due on May 16.
Analysts predict several scenarios for the markets, depending on the number of seats current favourites BJP-led NDA will get. However, if there is a hung Parliament, all bets will be off and markets may just crash, analysts say.
Manish Sonthalia of Motilal Oswal Asset Management told that at 6,800 levels on the Nifty, markets have priced in a victory for Narendra Modi, who is the BJP’s prime ministerial candidate.
However, if Mr. Modi’s doesn’t become the prime minister, markets will tank to 6,000 levels and it will happen very swiftly, he said. Markets may also tank if the NDA gets less than 220 seats, he added. On the contrary, if there is a Modi win, you could see 8,000 on the Nifty soon, Mr Sonthalia said.
Markets hope Mr. Modi to carry out policy reforms and there could be big moves in stock markets post budget announcement, Mr. Sonthalia says.
“The second half of the year should see meaningful traction on the upside,” he said.
According to Motilal Oswal Asset Management, Mr. Modi may straightaway begin work on cutting oil subsidies, hastening environmental clearances, bring a Real Estate Bill and may move quickly on investment proposals.
“It’s going to be a one-man show, where the Prime Minister’s Office will take all the shots, similar to what’s happened in Gujarat. However, a lot of sectors have their own set of problems and just a Modi coming in will not solve this problems,” Mr. Sonthalia says.
It will be difficult to quickly raise capital for public sector banks, for instance, who need Rs. 3.5- 4 lakh crore in government funding, Mr. Sonthalia says. Fixing the health of distributing companies and addressing the issue of coal shortage in the country are some other areas, where things cannot be addressed quickly, he added.
So, there could be a hope rally in some of these sectors, but the gains are unlikely to be sustained, he said.
According to Mr. Sonthalia, investors should adopt a risk-off mode going into the election results and add defensives in the portfolio.
“Investors should stick to fundamentals, rather than hope or perception… The key focus is to prevent downsides first,” he said.

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