Karnataka poll result surprised markets; limited upside from here: U R Bhat

A BJP victory in Karnataka opens the door for early general election; markets not factoring that in yet

It is a good performance by the Bharatiya Janata Party (BJP) in the Karnataka Assembly polls and this is being reflected well in the enthusiasm shown by the markets. The upbeat performance at the bourses was warranted, given the surprising outcome.

However, this is as far as the markets will go in the short term. They were already factoring in a good performance – though not exactly a majority – ahead of the poll result. The performance has actually been better than expected.

Going ahead, the markets will now look at domestic and global cues for direction. There are a number of headwinds at the global level that they will have to face now – rising interest rates in the US, geopolitical situation in Iran, crude oil prices and the upcoming US – North Korea meet being some of them. That said, the sentiment will remain upbeat for a few days given the Karnataka assembly election outcome. The Nifty50 can hit 11,000 in the next couple of days.

Earlier, there was a debate that the general elections could be advanced in case the BJP wins in Karnataka. There are chances now that this may happen and we could see a renewed push to the argument to hold general elections alongside the assembly elections in Rajasthan, Chhattisgarh and Madhya Pradesh later this year (2018).

At the current levels, the markets are not factoring in the possibility of the general and assembly elections in these above-mentioned states being held together. BJP forming the government in Karnataka opens the door for an early election, but the markets are not yet factoring that in yet.

ALSO READ: Karnataka election results updates: BJP leads in 118 seats, Congress in 58

Foreign institutional investors (FIIs) will continue to be marginal sellers and this will be compensated by domestic flows. This is how the Indian equity market story will unfold, unless there is a dramatic shift in the economic indicators. Inflation, for now, is under control, GDP (gross domestic product) numbers are reasonably good. It is only the external side where we have a problem in terms of crude oil prices and rupee depreciation. These are two areas that the government will focus now. Once this is fixed, even the FIIs will start coming in.

The markets are worried about these two aspects – a widening current account deficit (CAD) and the pressure on the fiscal situation at a time when the government has to recapitalise the banks. If the government finances the bank recap program, it will definitely put pressure on the fiscal situation and the markets are not prepared for this.

If everything goes well for the economy, the markets can reach new highs. That said, the upside for the Nifty50 index remains capped at 11,500 levels. On the downside, it has support at 10,300 levels and then at 9,500 levels.

Karnataka Election results 2018 LIVE: Shah sends top guns to salvage state

Karnataka election result 2018 LIVE updates: With Narendra Modi wave still riding high, trends show BJP winning. Sonia Gandhi, however, has plan B for Congress-JD(S)

Karnataka Election Result LIVE updates: Giving Karnataka election outcome a new twist, Sonia Gaondhi reportedly rang up HD Kumaraswamy have offered support to the JD(S), with him as the Chief minister of the state. Incumbent Karnataka Chief Minister Siddaramaiah will resign rom his post at 4pm toady. With Modi wave still riding high, the Bharatiya Janata Party (BJP) on Tuesday forged ahead winning 43 seats and leading in 105. The ruling Congress, desperate to retain power in the state amid shrinking appeal nationally, suffered major blows and was ahead only in 75 seats constituencies in the Karnataka Assembly polls, according to trends. it managed to win 19 seats by 1:30 pm. Karnataka Chief Minister Siddaramaiah lost from Chamundeshwari. In contrast, the BJP’s Chief Ministerial face B.S. Yeddyurappa beat his Congress rival by 35,397 votes in Shikaripura. JD(S) was leading in thirty three seats by 2:30 pm.

BJP activists and leaders celebrated noisily in both Bengaluru and New Delhi, waving party flags and shouting slogans hailing Prime Minister Narendra Modi, their main vote-getter, and party President Amit Shah.

There were also celebrations outside the residence of Yeddyurappa, who has been Chief Minister earlier too.

The Janata Dal-Secular of former Prime Minister H.D. Dewe Gowda, which has been expected to play the role of a kingmaker in the event of a hung Assembly, was leading in 40 seats — the same number it won five years ago.

As the vote count progressed, BJP leaders became assertive, saying they were confident of taking power again in Karnataka while Congress leaders began to speak about the possibility of an alliance with the JD-S.

BJP leader and Union Minister Sadanand Gowda said that there was no question of any alliance. Senior BJP leader K S Eshwarappa from Shivamogga, senior most candidate in the electoral fray and minister Kagodu Timmappa from Sagara and the chief minister’s son, Yatindra, from Varuna were also leading over their rivals.

Karnataka election has been billed as the biggest political battle of 2018. The Bharatiya Janata Party ‘s(BJP’s) bid to reclaim the state has faced its toughest challenge from one man – chief minister Siddaramaiah, who looks to beat incumbency. Who will Karnataka pick? The voters have decided and the entire nation will know the Karnataka election 2018 result today.

Meanwhile, four of the seven polling agencies predicted in their exit polls that the BJP would emerge the single-largest party today. While most exit polls predicted a hung Assembly with the BJP ahead, two said the BJP would either come very close to or cross the halfway mark of 112 seats, while the India Today-Axis exit poll said the Congress might bag a majority. All exit polls gave the H D Deve Gowda led Janata Dal (Secular) nearly two dozen seats or more, which could make it the kingmaker in case of a hung Assembly.