Assembly election result: FII dollars may power megacap stocks beat madcap rally
megacap stocks that have been left behind in the 'madcap' rally in recent months.
FIIs who had been bothered by the Indian market’s rich valuations and were hoping for a correction to build more substantial positions in the market may see those hopes evaporating, leaving them with the unsavory choice of either staying out of a market that may not correct or may continue to do well or entering the market at current levels despite their reservations about the market’s valuations in general, Kotak Equities said.
«We expect some of the FPIs to follow the latter approach, especially as (1) valuations of the mega-cap stocks are still reasonable and (2) FPIs are likely to prefer investment in largecaps; they are unlikely to look at midcaps and smallcaps for both liquidity and valuation reasons,» said Sanjeev Prasad of Kotak.
While many investors find Nifty's valuations rich, megacaps have been underperforming other largecaps, midcaps and smallcaps.
Global brokerage firm Jefferies said BJP's win in the 3 state elections of MP, Rajasthan, and Chhattisgarh has boosted investor sentiment which should augur well for domestic cyclical sectors like banks, industrial, power, and real estate.
«We had recently deployed the cash in our model portfolio, partly on our expectations of BJP's strong performance in state polls. The welfare announcements should help the „Bottom of Pyramid“ (BoP) demand recovery where we prefer Telecom and 2Ws over staples.
