Capital goods major, Bharat Heavy Electricals saw a substantially rally in trade on Monday and Tuesday. Similarly, Larsen and Toubro has seen a rally from Rs 1020 to Rs 1080 in a span of just four trading sessions.
Voltas is up from Rs 118 on Feb 20 to current levels of Rs 129. Crompton Greaves has gained five per cent in the last few days. Clearly, investors once again are laying bets on the capital goods and infra sector, clearly positioning themselves for a Narendra Modi led government at the centre.
The reason for laying bets on capital goods and infra stocks is simple. Both these sectors are linked to the economy and the theory is that a Modi led NDA government would strive to push economic growth and hence these sectors would be the first to benefit.
However, investors maybe taking bets a little too early. First, election results are always uncertain and one cannot say with certainty that there would be a Modi led government at the centre. Secondly, nobody, including Narendra Modi has a magic wand to kickstart the economy immediately.
Thirdly, unless the interest rate cycle reverses, its unlikely that these sectors which are capital intensive sectors would benefit immediately.
Hence, it maybe a little too early to bet on these stocks as investors are working on too many assumptions.
The one and only one reason to invest in these stocks is that some of them are fundamentally sound and the valuations are very attractive.