The Bharatiya Janata Party (BJP) retained power in four states – Uttar Pradesh (UP), Uttarakhand, Goa and Manipur, as per the declared results of state elections on Thursday. Post elections, Jefferies believes that govt policy action may pickup again.
“We believe the govt may make a push for privatisation though in the next few months. The sale of Air-India in late’21 was a pre-cursor to the same and govt is now likely to pursue privatisation of oil major BPCL, select PSU banks and other PSU assets / land in the months ahead. Political success should also imply that govt spending direction in favor of infrastructure should see no change,” the global brokerage said in a note.
Fuel price revisions have been stopped since early November 2021 and the oil marketing companies (OMCs) need a sharp jump in retail prices to restore normal marketing margins.
An uptick in fuel retail prices over next few days could be a positive for OMCs. Also, privatization candidates such as BPCL, Concor, BEML, SCI and IDBI could see some positive newsflow, Jefferies added.
As the results are by and large in-line with expectations and exit poll predictions, the equity markets will move on to more important aspects in the near term lik the Russia-Ukraine geopolitical conflict, the US Fed rate hikes, elevated crude oil prices and the RBI’s response to rising inflationary pressures in the economy.
Motilal Oswal expects stock markets to stay volatile until the existing headwinds subside. “Valuations though at a P/E ~19x FY23E EPS for Nifty look relatively more reasonable,” it said.
Even with policy continuity, the poll results are not likely to impact markets’ direction much, and the focus will be squarely on how policymakers minimize the economic cost of the geopolitical quagmire, as per experts.
“As we parse the macro impact of higher energy prices, we understand the situation is still fluid. However, with Brent possibly averaging $100/bbl in FY23, it could imply inflation above 5.6%, the CAD-to-GDP ratio above 3%, and growth below 7.5%. However, our prelim assessment suggests aggregate Nifty profits to be fairly resilient in this downside scenario, with scope for a roughly 30%/20%/10% cut in the aggregate FY23E PAT of Auto/Cement/Consumer stocks in the Nifty,” said brokerage Emkay.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.