Bernstein retained its view of high single-digit returns in the stock market and kept its Nifty target unchanged at 23,500 saying that the brokerage expects volatility to remain owing to uncertainty on policy path. The brokerage remained overweight on financial stocks but made picks across sectors.
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Owing to the BJP not gaining a majority on its own, Bernstein said that the party’s independence on allies will increase whether these are pre-poll ones or seat-sharing arrangements are made. It said, “There are no contentious topics, as the NDA had a consensus on policies. In an extreme scenario, if the opposition manages to wrest away the key allies, the investment approach to India would change materially. As we consider it a low-probability event, we do not delve much into this topic.”
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The new government’s focus could change, Bernstein said, as policies could be tweaked to focus more on spending towards direct social schemes.
“With capex likely to be driven more by the private sector as end markets are changing, the role of government will in any case moderate over time, limiting material risks to the cycle,” it said.
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Continuity of power is a powerful enough narrative to support the economy, it said, adding that there may not be a material impact in the near term.
“Given what we see – our previous stance on the market holds good. This is about decent economic growth but a peaking of earnings growth, less room for upward revisions and somewhat rich valuations. Hence, we retain our view of high single-digit returns, with the Nifty target unchanged at 23,500,” it said.
