Trump vs Modi: BJP’s Delhi poll win fails to lift Indian stock market on tariff overhang. How to tweak your portfolio?

The recent victory of the Bhartiya Janta Party (BJP) in the Delhi state elections is being viewed as a sentiment booster for stock market investors by brokerage house Motilal Oswal Financial Services (MOSL). However, lingering concerns over tariffs imposed by Donald Trump and weak corporate earnings have tempered this optimism.

After losing almost 500 points in trade on Monday, following the announcement of 25% tariffs by Donald Trump on steel and aluminium imports, BSE Sensex declined another 1,100 points in trade today to a low of 76,226.02. Its NSE counterpart the Nifty50 lost 350 points or 1.50% to trade precariously close to the 23,000 mark at 23,032.

MOSL attributed the win, which saw the BJP claim 48 out of 70 seats, to the party’s “double-engine” governance promise, Prime Minister Narendra Modi’s extensive campaign, and the anti-incumbency factor working against the Aam Aadmi Party (AAP). Despite AAP initially being seen as having an edge, the results aligned with exit poll predictions. While numerically small—Delhi contributes only seven Members of Parliament to the Lok Sabha—the capital’s political significance ensures heightened national attention.

Market Impact: Focus shifts to fundamentals

MOSL stated that the Delhi verdict is likely to ease concerns over policy continuity and coalition stability. The broader economic backdrop remains supportive, with the Union Budget focusing on consumption without fiscal slippage and the Reserve Bank of India providing monetary relief through a 25 basis-point rate cut. However, the market’s attention is expected to shift back to corporate earnings, global economic trends, and US trade policies under President Donald Trump.

Amidst this uncertainty, the brokerage recommended maintaining a large-cap-heavy portfolio, citing valuation gaps between large-caps and small-to-mid-cap (SMID) stocks. 

The Nifty50 index is trading at 19.8 times its 12-month forward earnings, approximately 4 per cent below its long-period average. In contrast, the Nifty Midcap 100 trades at a valuation premium of 50 per cent (30 times earnings), while the Nifty Smallcap 100 is at a 13 per cent premium (22 times earnings). Given the stretched valuations in broader markets, MOFSL advised caution in sectors where stock prices have outpaced earnings growth.

Sectoral preferences & stock recommendations

MOSL maintained an overweight stance on Consumption, IT, BFSI, Industrials, Healthcare, and Real Estate, while remaining underweight on Oil & Gas, Cement, and Metals. With the budget reinforcing consumption as a key growth theme, the brokerage anticipates strong performance across discretionary consumption, retail, jewellery, hotels, apparel, two-wheelers, entry-level four-wheelers, and capital markets.

Top Largecap Picks: Titan Company, Mahindra & Mahindra, Maruti Suzuki, ICICI Bank, SBI, HCL Tech, Bharti Airtel, L&T, Sun Pharma, Trent, Hindustan Unilever, and Dixon Technologies.

Top Midcap & Smallcap Picks: Indian Hotels, Page Industries, Cummins India, BSE, Godrej Properties, Coforge, Metro Brands, IPCA Labs, Angel One, and JSW Infrastructure.

Revival of “Brand Modi” and its political implications

MOSL noted that the Delhi win marked a revival of “Brand Modi,” reinforcing voter trust in the Prime Minister’s leadership and governance model. The victory is expected to facilitate developmental initiatives in Delhi, benefiting from alignment between the state and central government.

MOSL further highlighted that BJP’s string of electoral victories would strengthen the National Democratic Alliance (NDA) government’s policy momentum. With wins in key states, the ruling party has dispelled concerns over coalition stability, giving it greater flexibility to steer economic policies. In contrast, the opposition, particularly Congress, continues to lose ground, suffering significant setbacks in Haryana, Maharashtra, and Delhi.

A major factor in BJP’s Delhi triumph was the support of middle-class voters, who expressed dissatisfaction with urban infrastructure under the AAP government. Political parties across the board promised various freebies in their manifestos, but MOFSL pointed out that the ₹1 trillion tax stimulus introduced in the FY26 Union Budget has signalled a shift in policy focus towards middle-class interests.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.