Modi, Narendra Modi

Hoshiarpur: Prime Minister Narendra Modi addresses a public rally for the last phase of Lok Sabha elections, in Hoshiarpur, Punjab, Thursday, May 30, 2024. (Photo: PTI)

Stocks of companies such as Mukesh Ambani-owned Reliance Industries (RIL), Sunil Mittal-controlled Bharti Airtel, Indus Towers and select PSUs such as ONGC, Indraprastha Gas Ltd (IGL), NHPC, which analysts at CLSA dubbed as ‘Modi stocks’ in a recent report, have outperformed the Nifty 50 in the past six months.

CLSA said the average gain in ‘Modi stocks’ in the last six months has been 50 per cent, compared with a 14 per cent rise in the Nifty. If the market celebrates strong election results for the ruling party on June 4, or vice versa, this could be the basket that will see the biggest uptrend.

Also read: 17 penny stocks that rose 500 times during Narendra Modi’s tenure. Do you own any?

To gauge ‘election euphoria’, CLSA scanned 183 stocks where active futures and options (F&O) offerings helped make them a more liquid part of the Indian equity market. CLSA said the build-up of election-related expectations began about six months ago in early December 2023 with strong state election results for the ruling party.

What are Modi stocks?

In the last six months, while the Nifty50 has gained 14 per cent, nearly 44 per cent of the stocks in the above list of 183 stocks have underperformed the Nifty, indicating that the rally has not been broad-based.

Modi Stock

Modi Stock

“We probe further and isolate stocks that are popularly considered to be the most direct beneficiaries of the expected policy measures if we see the ruling party led by PM Modi winning a third term with a strong electoral majority. Since these stocks are moving higher based on sectors and perceptions – we call them ‘Modi stocks’ for ease of remembering. These are stocks of capital expenditure and infrastructure related sectors, PSUs or certain corporate houses,” CLSA’s Vikas Kumar Jain, Adarsh ​​​​Agarwal and Hemant Kothari wrote in a recent note.

He added: “Simply put, we identify 54 of these 183 stocks as Modi stocks or about 30 per cent of the F&O universe. Interestingly, only five of these 54 stocks have underperformed in the last six months, which means almost 90 per cent of Modi stocks have outperformed the Nifty in the last six months.”

Despite coming from different sectors, all 27 PSU stocks in the F&O space have outperformed the Nifty in the last six months, CLSA said. Of the 27 non-PSU ‘Modi stocks’, all except five cement companies have outperformed the Nifty in this period, which CLSA said underlines that price action in the last six months has been dominated solely by this election theme.

“This also means that 58 per cent of the remaining 129 stocks underperformed the Nifty during this period. In other words, it was much more difficult to pick outperforming stocks in this sub-group,” Jain, Agrawal and Kothari wrote.

Modi's shares surge

Modi’s shares surge

In this basket of Modi stocks, the favourite buys for CLSA India analysts are ONGC, NTPC, NHPC, SBI, Power Finance, IGL and Mahanagar Gas in the PSU sector. In non-PSU Modi stocks, CLSA analysts like Ashok Leyland, UltraTech Cement, Larsen & Toubro (L&T) and tariff-hike linked telecom stocks through Bharti Airtel, Indus Towers and RIL.

first published: May 30, 2024 | 5:29 pm First

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