The upswing in domestic equities, post the ruling Bharatiya Janata Party's (BJP) thumping victory in Uttar Pradesh, is here to stay in the near term, market analysts told BloombergQuint.
After the BJP won a whopping 325 of 403 assembly seats in the country's largest state, the National Stock Exchange's benchmark Nifty 50 index hit a lifetime high of 9,122.75 in early morning trade on Tuesday. This surpasses the previous peak of 9,119.20 on March 4, 2015 in intraday trading.
Market participants believe that the clear majority would give Prime Minister Narendra Modi-led government a chance to push through economic reforms.
Independent market expert Ajay Bagga said the markets had not anticipated such a strong mandate for the ruling party and the BJP's victory brings continuity and stability in policymaking.
Indian stock indices have outperformed and are overbought and overvalued at current levels, Bagga added. Calling three ‘Os' a “dangerous combination”, he said the market has the room to run up another 10-15 percent before it comes down on account of expensive valuations.
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He believes a 25 basis point hike by the Federal Reserve in its Wednesday meet is a given, and the markets will look to chairperson Janet Yellen's commentary for guidance.
Bagga is betting on domestic-consumption related themes, such as fast-moving consumer goods (FMCG) and consumer durables.
He expects two-wheeler companies to see a revival post the new harvest in April, and is also positive on housing finance companies, cement, cables and metals mainly driven by the government's focus on infrastructure construction and affordable housing.
Hiren Ved, director and chief information officer, Alchemy Capital Management Pvt. Ltd., echoed Bagga's view and said that Indian markets should be able to sustain the new highs achieved on Tuesday over the next few days.
He is placing his bets on rural-focused companies.
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