How The Karnataka State Election Outcome Will Impact The Markets?

The Karnataka state was a battleground for two large parties BJP and Congress to fight for its control. The Congress got the upper hand to win the state election and defeated the other. This has led to investors wondering how will this impact the markets on Monday.

Stock market experts are of the view that if the markets are correct it should be seen as buying opportunity by smart investors as only the Karnataka assembly poll was at high stake for the BJP. In upcoming major assembly polls, BJP has no big stake involved as it is an emerging party in Telangana and is in opposition in Chhattisgarh, Rajasthan, and Madhya Pradesh.

There will not be a major impact on the Indian markets, an advisor who did not wish to be named has suggested. At the max, only minor correction of maybe 2 to 3 points, if at all due to Karnataka state elections the markets are correct. It would not sustain for more than one or two weeks as it has factored in.

The advisor further added that majorly the FII would drive the markets. The FIIs' net selling, if they are pulling out, then only corrections would be seen. The markets would have factored in the current election outcome, so then it will not make any large impact and within a month it moves on to the next event.

Sandeep Kulkarni, the founder of Moneyworks4u Financial Advisors, said that BJP was expected to lose in the current state elections. There will be short-term volatility for roughly 2 weeks, but in the long, it will not matter. The impact of state elections of BJP losing in Karnataka can at the max see a correction of 2 to 5 % on the sidelines.

Historically it is seen that in 2014 when BJP had lost one state election, the markets did correct by a few points but within a few months the markets then soared higher 5 times, Kulkarni added.

The major drivers of the markets are the businessmen to attract the attention of FIIs as there is great potential in India's growth story over the long term. Kulkarni said, the governments will come and go, and announce various policies, and it does not matter as long as there is development happening.

In the last few years, BJP and Congress government at the center has done work in growing India. Thus unless major changes like Covid occur, which muted the country's growth, it would be futile to say that the current state elections will have any major effect on the markets.

The Indian bourses ended higher on Friday, the Sensex closed at 62,027.90, 123.38 points (0.20%) and the Nifty closed 17.80 points (0.1%) higher at 18,314.80.