What are Modi stocks and should you buy them before election results? Here's the full list (2024)

As a forward-looking animal, the stock market has already discounted the probability of Narendra Modi's return as Prime Minister when election results are declared on June 4. Of special interest this election season are Modi stocks which have gained an average of 50% in the last six months.

This may be the basket that continues to rally the most if the market celebrates a strong election result for the ruling party on 4 June, say CLSA analysts.

What are Modi stocks?
Given the sheer impact that the government's policies have had on several sectors, investors have begun to categorise stocks that are direct policy plays into a new basket called Modi stocks.

These stocks are seen as being the direct beneficiaries of popularly expected policy measures from Modi 3.0. Many of these stocks are rallying more on perception.

Modi stocks are related to capex and infrastructure-linked sectors, PSUs, or stocks of some corporate houses.

Also read | Modi magic! PSU stocks create Rs 7 lakh crore wealth this election season

Full list of Modi stocks
From the F&O universe of 183 liquid stocks, CLSA has identified 54 companies that are perceived as direct beneficiaries of PM Modi’s policies. Half of them are PSUs.

CLSA has identified these counters as Modi stocks - HAL, Hindustan Copper, NALCO, Bharat Electronics, Cummins India, Siemens, ABB India, Indus Towers, SAIL, BHEL, Dixon, Adani Ports, REC, PNB, Tata Power, HPCL, GAIL, JSPL, InterGlobe Aviation, IRCTC, PFC, IOCL, BPCL, Petronet LNG, Power Grid Corporation, SBI, GMR Airports, NMDC, Canara Bank, Ambuja Cements, ONGC, Coal India, Container Corporation of India, NTPC, Bharat Forge, Bharti Airtel, Indian Hotels, ACC, Adani Enterprises, Bank of Baroda, Polycab, Gujarat Gas, MGL, Ashok Leyland, Reliance Industries, L&T, IGL, UltraTech Cement, Vodafone Idea, JK Cement, Shree Cement, The India Cements, Dalmia Bharat and The Ramco Cements.

How are Modi stocks performing?
About 90% of these 54 Modi stocks have outperformed Nifty in the last 6 months. Despite coming from varied sectors, all of the 27 PSU stocks from the F&O space have beaten Nifty over the last six months. "Of the 27 non-PSU Modi stocks, all stocks have outperformed Nifty over this period other than five cement companies. This underscores that price action in the last six months has been singularly dominated by this election theme," CLSA said.

Should you buy Modi stocks?
Analysts at Kotak Equities say that the market seems to be discounting that BJP will get around 325 seats with most stocks trading at full-to-rich multiples and many "narrative" stocks and PSUs trading at unfathomable multiples.

If the election results fall below expectations, Modi stocks would be among the worst hit, at least in the short term.

"Notwithstanding this anticipation-fuelled rally, a few weeks after the election, investors will be confronted with a reality check that many of the positives these stocks may have started baking in will be realised only in a gradual manner. This may drive profit-taking by the less patient holders of Modi stocks," CLSA said.

Market data shows that in the 2014 election, the PSU index had rallied 82% in 10 months while in 2019 PSUs had seen an 18% upside in 7 months.

L&T, NTPC, NHPC, PFC, ONGC, IGL, MGL, Bharti Airtel, Indus Towers, and Reliance are the preferred Modi stocks for CLSA analysts.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)