Long bull run has begun; ideas to re-build strong portfolioThe response to BJP's prime ministerial candidate Narendra Modi has been overwhelming. The electorate has given a strong mandate to the National Democratic Alliance (NDA) and the new government can take bold economic steps without any strong opposition.

This has given a new hope to the market, with fund managers and top brokers terming the recent rise on the benchmarks, as just the start of a new bull-run.

"We believe the economy may be at a cyclical bottom and growth/inflation should improve. However, for a sustainable increase in growth rates, significant policy reforms are required in the areas of resource allocation, subsidies, administrative approvals and repossession laws. Given the strong mandate given to the BJP-led government, and its pro-growth agenda, we believe that the new government should be able to easily implement these reforms," said Barclays Equity Research report.

According to the brokerage, following the strong recent run up, valuations in the India equity market are not cheap and, hence, the market could consolidate in the near term. On the other hand, the strong developmental focus of the new government should lead to longer-term appreciation of the market.

"Themes to play for cyclical recovery: 1) corporates with improving asset utilisation (Tata Steel, Hindalco); 2) corporates with reducing balance sheet leverage (Tata Steel, HindalcoBSE 5.60 %, IRB Infra); 3) unleveraged corporates investing in new infrastructure opportunities (Adani Ports, Coal IndiaBSE 10.72 %, L&T); and 4) companies benefiting from a lower subsidy regime (ONGC, BPCL)," the report said.

CLSA is of the view that the BJP victory ha raised expectation of faster economic recovery. The brokerage has re-jigged its model portfolio by

reducing 2ppts each from IT and Pharma and adding 2 pts each to L&T and SBI.

Its preferred plays include ICICI BankBSE 0.25 %, SBI, Ultratech, L&T and Maruti. Among the midcaps, it expects IndusIndBSE 1.83 %, PFC, Ramco Cement, Jubilant FoodworksBSE -0.70 %, JSW energyBSE 8.90 %, Prestige EstatesBSE 4.55 % and Motherson SumiBSE -0.67 % as top investment bets.

The brokerage has replace Cairn IndiaBSE 3.32 % with ONGCBSE 8.09 % in model portfolio. It has removed United SpiritsBSE -0.78 % and added to UltratechBSE 0.15

% and SesaSterlite to the list.

Earnings outlook has significantly improved, particularly for the domestic sector, and an upgrade cycle is expected to start soon, say Goldman Sachs report. It has increased its Nifty target to 8,300 from 7,600 earlier, an upside of nearly 15 per cent from current levels.

It is of the view that after the strong mandate, new government should be able to undertake its reform agenda and address India's significant macro challenges. However, implementation will be the key to improving the growth trajectory.

"We continue to favor cyclicals over defensive sectors and emphasize reform beneficiaries. OW sectors: Banks, Energy and Industrials. We also highlight earnings upgrade candidates and mid-cap cyclical ideas," the report said.

It is bullish on reforms-based stocks such as ONGC, Coal India, SBI, L&T, Power Grid CorporationBSE 3.18 %, Adani Ports & SEZ, Bank of BarodaBSE

3.22 %, JSW SteelBSE 4.43 %and Crompton GreavesBSE 10.27 % after the BJP victory.

Citigroup is of the view that the change in government is likely to be growth supportive, currency supportive, focus on bringing down inflation and interest rates and improve fiscal deficit.

"We believe the best way, given some strong stock/sector performances, and

a political and Economic cycle ahead, is to OW Banks, IT, Energy & Cement, a mix of growth, revival, reform and valuations," the report said.

It prefers Axis BankBSE 3.69 %, Hindalco, ICICI Bank, LupinBSE -3.50 %, Maruti, ONGC, SBI,Tata MotorsBSE 0.22 % and WiproBSE -4.74 % among the largecaps.

In the midcap space, it likes Aurobindo PharmaBSE -3.78 %, BPCLBSE 5.16 %, DB CorpBSE 0.29 %, Federal BankBSE 5.96 %, Gujarat PipavavBSE 5.87 %, IDFC, Info-edge, LIC HousingBSE 8.20 %, MindtreeBSE -4.24 % and Prestige Estates.

According to JP Mogran, the majority in parliament augers well for governance and meaningful reforms. The brokerage would avoid companies with high leverage currently and it is cautious against PSU Banks, NBFCs and private infra companies.

It is bullish on Zee, Tata Motors, ITCBSE -4.13 %, GSK Cons, RILBSE 3.20 %, ICICI, DRL,HDFC BankBSE 3.06 %, InfosysBSE -4.81 %, Tech Mahindfra, GrasimBSE -0.10 %, Tata SteelBSE 3.08 %, SesaSterlite, Power Grid and Tata PowerBSE 8.17 %.