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The Economic Times

A non-BJP government in 2019 not impossible: CLSA

NEW DELHI: The Narendra Modi-led government, which is expected to win 2019 general elections, may find the going tough, said CLSA today.

This is even as the ruling coalition is seen to garner lesser seats this time.

During a presentation at CLSA’s 21st India Investor Conference, the broking firm talked about a 25-30 per cent probability of a weak coalition taking charge at the Centre. It also spoke of another 5-10 per cent probability of the Congress coming to power with a strong coalition, making 30-40 per cent the case for a non-BJP government in 2019.

The foreign brokerage saw a lower probability of the ruling dispensation repeating its 2014 performance. The Opposition unity will hold the key, it said.

As a base case scenario, the brokerage house sees 50-55 per cent probability of the Modi government retaining power, but with the help of a coalition.

In the case of a weak coalition, a 10-20 per cent steep correction in the market is likely, CLSA added. Investor sentiment, it said, may remain weak for an extended period. Only selective buying opportunities for long-term investors will arise in such a scenario despite correction.

It advised buying into IT, pharma, utilities and staples should such an outcome play out.

CLSA's calculation is the Rahul Gandhi-led party may alone need 150 seats for any chance of a Congress-led strong coalition.

The probability of this scenario is low, given the same party was reduced to 44 seats in the 2014 election.

Keeping all these scenarios in mind, CLSA said buying into consumption, select private banks and financials, select exporters including IT service providers and Reliance Industries, is advised.

In the event of Modi keeping power, the priorities of the government will remain the same, CLSA said further, adding that a repeat of 2014 could be good for capex-related sectors and midcaps.
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