Markets May See Knee-Jerk Reaction On Karnataka Election Outcome

Business

oi-Sunil Fernandes

By Sunil Fernandes

Published: Sunday, May 20, 2018, 11:36 [IST]

Indian benchmark indices may see some selling pressure, when markets open for trade on Monday.

A gap down opening on the Nifty of 50-60 points cannot be ruled out. However, it is also possible that we might see some recovery for the markets, which closed 1.6 per cent lower this week.

The larger worry for the market right now is that the Karnataka elections hints at the possibility of local alliances being centred around the Congress. Now, this going to be a big blow for the Narendra Modi led BJP, because, if that happens, it is possible that we might see a severe loss of seats for the party in states like Karnataka, Maharashtra and Bihar.

In some states like Gujarat, Rajasthan, Punjab, Goa and Madhya Pradesh it would be impossible for the party to better the near perfect record that it has.

Having said that it is one thing forming alliances and another thing holding them together, despite contradictions.

In any case, the markets closer to the national elections, will start discounting a much smaller number of seats for the BJP, than they presently have.

In any case, a modest reaction in the markets is rather possible on Monday, with a possible recovery towards the end of the day. One reason for the same is the buying support that we are likely to see from domestic institutions. Most of these institutions are flush with funds and as such we may see some buying support from these set of investors.

Investors who are looking to place lumpsum amounts in the markets, should be a little weary, as there is a whole lot of volatility expected in the next one year, due to political outcome in various states.

Buying in small quantities to average out when the markets dip, could be the best way forward.

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