The Friday rally of 405 points on the Sensex taking it to a new lifetime high, had something unique about it. On the day, Infosys fell more than 2.5 per cent and Wipro 3.25 per cent. TCS another big wig from the IT sector fell along with HCL Tech.
That was not all. Other defensive stocks like those from the pharma space also dropped sharply. Dr Reddys, Sun Pharma and Lupin are classic examples.

Normally, when the Sensex has such a huge rally you would expect some of these stocks to at least marginally gain ground. Bit, that did not happen. It's clear investors were dumping shares from the IT and Pharma sector, which have already rallied substantially in the last one year.

The big bets are now on banking on hopes that a Narendra Modi led NDA government would propel economic growth. On Friday ICICI Bank rallied as much as six per cent, while perennial laggard State Bank of India was up 4.6 per cent.
Yes Bank jumped 8 per cent, while HDFC Bank, IndusInd Bank and Axis Bank were up more than 5 per cent.

Capital goods stocks also joined the party with the likes of Bhel, Crompton Greaves and Siemens rallying.

Why to buy Cap Goods, Infra and Banking?

Forget whether Narendra Modi becomes Prime Minister or not. One reason to buy banking and infra stocks, particularly PSU banks is that they are very cheap. Most PSU banks are trading 0.5 times book value and some are at less than 5 times price to earnings multiples. This is dearth cheap by any standards. These stocks have been languishing for months now and its high time investors showed interest in them.

On the other hand pharma stocks are horribly expensive and need to be sold into. As the economy recovers be rest assured that banking, capital goods and pharma stocks would be the best bets. And, if we have a Narendra Modi led government at the centre, that would be the perfect icing on the cake.

GoodReturns.in