Prabhudas Lilladher, one of the leading broking firms, expects the equity market to turn cautious in the run-up to the second phase of the General Election and give up some gains closer to the polling date.

However, if the NDA government comes back to power for the third time, it expects Nifty to reach 25,810 by the end of this year from the current level of 22,570.

Amnish Aggarwal, Head of Institutional Research at Prabhudas Lilladher, said the Nifty reached an all-time high, but slipped by four per cent subsequently due to escalating geopolitical tensions and fluctuations in crude oil and commodity prices.

Despite opinion polls forecasting a comfortable victory for the NDA, the markets are not ready for a repeat of the 2004 election outcome. When the election results were announced on May 17, 2004, the BSE Sensex plunged 15 per cent, he said addressing a webinar on Thursday.

Advising investors to buy on dips till the poll results are announced on June 4, he said foreign portfolio investment will increase significantly after the uncertainty on the political front and monsoons are cleared.

Analysing the manifestos of both the leading parties, he said the Congress party seems to have high social welfare spending, with a promise to credit ₹1 lakh to the eldest woman in the family. The party’s hard-to-implement welfare schemes will cost about ₹10-20 lakh crore to the exchequer if they are implemented completely, he said.

On the other hand, the BJP manifesto provides more clarity on the economic path, focussing on building modern infrastructure and investing in technology transition, sweeping the universe at the expense of freebies.

Asked what will be the impact on the market if NDA fails to make it the third time, Aggarwal said an unexpected result in 2004 led to Sensex crash by 15 per cent and the markets turned jittery. Some of the stocks dependent on performance linked scheme in capital good and engineering sectors will be hit badly, he added.

On the lower turnout in the first phase of the election, he said the polling this year was delayed by three weeks compared to 2019, and this led to voters getting roasted in the heat wave. Moreover, he said complacency may have crept in with few voters after hearing about the landslide victory for the present government.

Prabhudas Lilladher expects some sectors, such as infrastructure, banking, healthcare, capital goods, telecom, and green energy businesses, to benefit if the NDA government is voted back to power.