K’taka done and dusted, investor focus now on oil

Investor focus has shifted to rising oil prices and inflation after Karnataka poll verdict gave a hung assembly. Earlier in the day, wide swings in the fortunes of main players in Karnataka fray flattened the biggest stocks rally in three months. The benchmark BSE Sensex erased an intra-day advance of 1.2 per cent to close little changed after the Congress said it would support JDS to form the government in Karnataka. Stocks rallied in early trade after trends showed the BJP was set for a majority.

Investors are wary that the BJP might just fall short of the number required to form the government and this has pulled back the market, said Sushant Kumar, a fund manager at Raay Global Investments. The volatility will persist until there is certainty of who forms the government.

The inconclusive outcome has resulted in a hung assembly, paving the way for the JDS to play kingmaker in forming a coalition government. Although BJP fell short of simple majority, investors see the vote as bolstering the ruling party’s chances of winning a second term in next year’s national ballot, said Abhimanyu Sofat, vice-president India Infoline. Investors were in fact betting that BJP will manage to win the elections on Modi wave.

“BJP has emerged as the single largest party that itself has signaled that the policy directions are on track and are in sync with the expectations of the masses. Although BJP may struggle to form the government but the fact that it has emerged as the single largest party is a sign that markets will not ignore. Who forms the government at the state level is although a different story which the market is not really concerned with but sentimentally in the short term the market will react negatively, Jimeet Modi, founder & CEO, SAMCO Securities & Stock.

“Equity market witnessed increased volatility as the election outcome indicated that BJP was just short of a clear majority. Investors generally like a stable government and a decisive mandate is something markets always take positively. Going by last few weeks’ trends, markets were factoring in a decisive win for BJP. While they may be short of the majority, BJP has emerged as the single largest party and that trend is something that could help them in the upcoming General Elections,” Siddharth Khemka, Head of Retail Research, Motilal Oswal Securities said.

“The real outcome of the elections will only be visible in the next few days when the parties are able to hold their lot together and take a shot at the Karnataka assembly,” says Jaikishan J Parmar, research analyst with Angel Broking.

The 30-share BSE index hit a high of 35,993.53 in morning trade. Later, it met with profit-booking at higher levels and slipped in the negative zone to hit a low of 35,497.92, before settling 12.77 points, or 0.04 per cent to 35,543.94. The gauge had gained 310.44 in the previous two sessions.

The 50-share Nifty reclaimed the key 10,900-mark to touch a high of 10,929.20 in initial trade and fell back by 4.75 points, or 0.04 per cent, to end at 10,801.85. It touch a low of 10,781.40.