Capital goods, infra and banking stocks may rally on Modi's development plans

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Capital goods, infra and banking stocks may rally on Modi's development plans
NCC: Quotes, News
BSE 90.80BSE Quote1.2 (1.32%)
NSE 90.80NSE Quote1.15 (1.27%)
IRB Infrastructure Developers: Quotes, News
BSE 236.00BSE Quote6.6 (2.80%)
NSE 234.30NSE Quote8.25 (3.52%)
Stocks from the capital goods, construction and infra sector would continue to rally as Narendra Modi pushes through his planned development agenda. With growth and investments likely to be boosted, investors believe that financial prospects for these companies is likely to improve.

Some of these stocks have seen a phenomenal run. NCC has rallied more than four fold from levels of Rs 16.50 seen in Sept 2013 to the current levels of Rs 63. IRB Infra, Larsen and Toubro, Gammon Infra and Gammon India have all seen their share prices almost doubling.

Investors are also beginning to bet on power and power utilities as well. Stocks like NTPC, Power Grid, Power Finance have all had a spectacular run.

Other set of stocks that are set to see a phenomenal run is likely to be the PSU banking space. Most of these stocks have nearly doubled from their September lows, but, analysts believe that there is a possibility of further upside and the reason is two fold: First, the new government may infuse fresh capital into the PSU banks and second is that non performing assets may fall as economic growth accelerates under the Narendra Modi government.

At least another 10-20 per cent upside cannot be ruled out in these stocks given the optimism of a stable government that lies ahead.

The one set of stocks that investors could sell is the IT pack which is likely to see some profit booking on a sharp appreciation in the rupee. The rupee has rallied sharply against the dollar on the hopes of a strong government led by Narendra Modi at the centre.

A further appreciation in the rupee is likely to hit IT companies badly, some of which have not been the best performers in recent times.

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