Mumbai: Benchmark indices BSE Sensex and NSE’s Nifty 50 surged nearly 1% on Tuesday as trends indicated that the Bharatiya Janata Party (BJP) is set to form government in Karnataka. Polling for the 222 of Karnataka’s 224 assembly constituencies was held on 12 May. However, analysts believe that post Karnataka elections, all focus will return to existing risks.
Early indications suggest a strong lead for BJP, just short of absolute majority, in Karnataka Assembly elections. This will go extremely well with the stock market, as it will anticipate the BJP forming the government on its own, possibly with the help of Independent candidates. Importantly, BJP’s huge tally will mean, it will hold all key ministries, which would have been shared, in case a strong partner was to ally with them. This ensures tighter control on the state. The verdict will be seen as a big sentimental positive for the indices, which were factoring in a severely fractured mandate. Market will take cues from this victory and expect similar result in the General Elections of 2019. Stability in government is what the stock market is seeking.
Karnataka was perceived as a bellwether for India’s state elections, with early indications of a strong mandate for the BJP likely a shot in the arm for market sentiments; this will take part of the sting from heightened asset markets volatility and wider GST-led adjustments. Short-term relief gains are likely in the domestic markets, particularly the currency, before attention returns to the prevailing exogenous risks.
Preliminary indications suggest massive loss to Congress and corresponding gains to BJP and JDS alliance. This is a positive surprise to the market. These results can be presumed to be harbinger for 2019 elections which is why the market is rejoicing. Populist measures which were earlier expected may not actually happen which would be considered good by all the international and local investors.
One known unknown uncertainty is over for the market sentiments, however, external perils are still bigger headwinds.