EW DELHI: All eyes are set on the coming general elections; and ahead of the watershed event the Indian markets are trading near their all-time highs, getting support from strong inflows from foreign institutional investors who are almost certain of a Narendra Modi-led NDA government after the general elections.
The basis of this 'certainty' is thanks to the opinion polls which are overwhelmingly predicting a BJP-led government at the Centre.
In this scenario, what should investors do ahead of the main event? Which stocks to buy and which sectors to choose from?
According to analysts, investors should focus on cyclical, banks and infrastructure, and probably shed weight on defensives such as IT and pharma.
"... it looks like that there is going to be a decisive government post May 16 and if that is your bet it makes sense to approach this market with an 'in the money' strategy," said Nilesh Shah, MD & CEO, Envision Capital.
"Investors may want to leave some ammunition for areas like technology, pharmaceuticals and dollar sensitives, where a correction has started," he said.
Shah is of the view that the sectors (IT & pharma) might get weaker before the guidance season; but barring that the rest of the pack, by and large, looks reasonably stable.

Unlike a mean-reversal rally where investors jump on to stocks that fell the most in the prior period, the recent rally has focused on sectors benefiting from a revival in large-scale infrastructure investment.

"With the sectors that had outperformed thus far, i.e. IT, healthcare and staples, remaining unchanged, the Indian market has been among the best performing in the past month," Credit Suisse said in a report.

Results of opinion polls have successively predicted a stronger victory for the BJP-led National Democratic Alliance, and predict 230+ seats for the alliance.

However, the global investment bank finds the opinion polls an unreliable indicator of the upcoming election result.