Sectors that should shine under Modi 2.0
>> As per the BJP manifesto, the government's focus on improving productivity of the farm sector and the measures to revive the rural market would be good for 2W and 4W companies like M&M, Hero Motocorp & Maruti Suzuki.
>> The government has allocated Rs 100bn under the FAME-II scheme for promoting clean energy and battery-operated vehicles. It will be implemented starting from 2019 to 2022. Key beneficiaries will be Maruti Suzuki, M&M and Tata Motors in 4W and other 2W companies, such as TVS Motors, Bajaj Auto & Hero MotoCorp.
>> Three rounds of UDAAN that provided fiscal incentives to carriers as air-connectivity already commenced on 23 unserved and 16 under-served airports through 174 routes. This would benefit IndiGo and SpiceJet.
>> PSB have been struggling to meet core equity capital requirements over the past few quarters, as the huge burden of NPA and thereby credit cost have resulted in erosion of core capital. Elara expects that weaker PSB would most likely be absorbed by the better ones in the PSB pack.
>> NDA government continuing can be an inflexion point and can result in the next leg of growth for the corporate credit. Major beneficiaries would be Axis Bank, HDFC Bank and City Union Bank.
>> A delayed summer onset due to prolonged winter also restricted growth of various FMCG companies. Lastly, a demonetization-led loss of cash in the system also resulted in lower money rotation, thereby slowing consumption.
Infrastructure & Logistics
>>Urban development: Launch the National Urban Mobility Mission to provide technology-based urban mobility solutions. 50 cities to be covered with metro network
>> Water: constitute an authority to interlink rivers and introduce Nal se Jal program for ensuring piped water supply for every household by 2024
>> Roads: construct 60,000km of national highways by 2022. Complete phase 1 of Bharatmala and launch Bharatmala 2.0 for development of state road network
>> Railways: complete DFC by 2022. Complete all visible gauge conversion and electrification by 2022. Focus on high speed trains & station redevelopment.
>> Airports: from 101 operational airports target to double in the next five years
>> Coastal: Double port capacity in the next five years. Develop inland waterways to shift cargo from rail & road to water
>> Power: Achieved installed renewables capacity of 77GW and target to achieve 175 GW by 2022
>> Health infrastructure: Start 75 medical institutes by 2022
>> Other: Development of infrastructure & connectivity in the Northeast
Elara continues to expect exchange gains to be used partially by firms to add bench strength and give wage hikes to employees offshore. Hiring has picked up significantly YoY and this supports Elara's thesis of firms investing in bench strength to cater to strong demand.