NDA is likely to return in 2024, investors may remain bullish on capex recovery sectors

• PM Modi, in his second stint as a Prime Minister continues to be one of the most popular leaders in India.
• The prevailing mood points to continuation of the current political regime, albeit with a slimmer victory margin.
• A change in the ruling party and the introduction of populist policies could potentially slow down the broader capex cycle.

The National Democratic Alliance (NDA) is most likely to return to power in 2024, according to a report by Jefferies Equity Research. This could be good news for capex and the housing sector over this decade and is likely to drive strong GDP growth and attractive investment returns.

Factors like anti-incumbency, and swings in fortune due to small vote shares that may have a significant impact on the results. The market is likely to see heightened volatility in the run up to the elections.

The Modi wave

PM Modi, in his second stint as a Prime Minister continues to be one of the most popular leaders in India. According to a report by PEW Research Centre, 80% of Indians have a favourable view of PM Modi.

This can be attributed to several factors like robust implementation of social schemes, focus on job growth, and strong connection with the voters both through communication and at an emotional level.

For those who invest in equities, capex driven growth policies of the Government would make the most impact. Also since voters vote differently at the state and national elections, potential setbacks of the ruling party at recent elections ( like in Karnataka) and potential losses in other states does not necessarily mean that the impact will be felt at a national level.

While some alliances of the ruling party have left since 2019, the party has forged new alliances which would stand them in good stead.

NDA Vs newly formed Opposition alliance called I.N.D.I.A

As many as 26 opposition parties have formed a grand alliance named (Indian National Democratic Inclusive Alliance) to challenge the BJP Government in the upcoming elections. The opposition parties run governments in 11 states and account for 40% of the population.

In a theoretical scenario, if only one candidate from each of these parties contests in any constituency and if there's a 100% transfer of votes among these parties based on the 2019 election results, the alliance could potentially secure an additional 20 seats out of the 543 national seats, bringing their total to 180.

However, It's important to note that six significant parties (YSRCP, TDP, BJD, BSP, JDS, and ADMK) with a combined total of 49 seats in the 2019 election are not part of this coalition. These parties could potentially align with the BJP's coalition (NDA) if the need arises.

The unknown variables

Interestingly, if we take into account Indian demographics, 125 million first time voters attain voting age in every national election. Hence their voting preferences do not have a precedence. In the 2024 elections, there will be 255 million voters (25% of total) who were not eligible to vote before Narendra Modi came to power in 2014.

Plus we know how events of national importance may play on the minds of voters and influence the outcome of the elections. Cross border conflicts, the issue of the Ram Temple and other factors can also impact how the elections pan out.

Investors may take an overweight stance on sectors geared towards capex recovery

According to analysts at Jefferies, the prevailing expectation points towards a likely continuation of the current political regime, albeit with the prospect of a slimmer victory margin. Consequently, the advice to investors is to take an overweight stance on sectors geared towards capital expenditure (capex) recovery.


These sectors encompass banks, industrial entities, and the real estate market. Notable recommendations include Axis Bank, ICICI Bank, SBI, L&T, Ultratech, alongside specific mid-cap industrial players such as Thermax, KEI, Siemens, and Kajaria.

In a strategic manoeuvre leading up to the elections, the analysts are recommending an overweight position in consumer staples, anticipating favourable policies that could benefit rural areas. However, they caution that a change in the ruling party and the introduction of populist policies could potentially slow down the broader capex cycle.

It is to be noted that even after the 2004 election upset, both the economy and the stock market managed to rebound, recuperating from initial losses within a span of just six months.