Karnataka Election: Sensex Spiked Nearly 500 Points But Erased All Gains As the Day Ended

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Karnataka assembly election has brought in volatility in the markets, thus reversing the trade of 500 points gain. It was obvious that the election results and the performance of BJP will dictate moment for Sensex and Nifty, though for a short-term period.

BJP struggled hard to reach the halfway mark of 112 seats to form the next government in Karnataka. Seeing the flow of the wind, existing chief minister Mr. Siddaramaiah stated that the Karnataka government would be formed by the alliance of Janata Dal and Congress.

A few of the Market Updates That Took Place Throughout the Day:

1. Initially, it was a neck to neck fight for both BJP and Congress, thus the market begins on a cautious note.
2. Dalal Street pinned down great hopes on the recovery of the earnings, but they are largely ignoring the steep on the macro level.
3. It was clear that the BJP’s victory will be well-received by the markets; however, in case of a narrow defeat, there will be no major dent in the markets’ optimism as BJP has higher chances in the general elections which will help in the upcoming year.
4. The BSE benchmark index - Sensex - registered a swing of 495-points during the session. However, it ended flat after a choppy session concerning the government formation in the state of Karnataka.
5. HD Kumaraswamy, son of JD(S) leader HD Deve Gowda, has won from both the constituencies where he contested: Ramanagaram and Channapatna.
6. Seeing BJP inching closer to a majority in the Karnataka election results, a desperate Congress made an open, unconditional offer to HD Deve Gowda's JDS to back the regional party. They offered support to JD(s) to form a poll-post alliance with the chief ministerial candidate of JD(s) choice.
7. With the results out, Karnataka Governor Valubhai Vala has granted appointments to the two claimants to power - BJP and the JD(s)-Congress combo.

What’s Our Expert Take on This?

Although BJP emerged as a single biggest party in the elections, it’s still short of the majority. This led to the depreciation in the value of Indian national currency to Rs. 67.90 against the US dollar. The market also turned negative with BSE Small and Mid Cap stocks selling under intense pressure. However, there is no need to panic for the investors as the outcome will only create a limited impact. In the long-term, markets will experience moments in tune with the fundamentals including the change in the Indian economy and ever-improving demographics. It can also be the case that the markets will now be more reactive to the international cues including the rising price of the crude oil and depreciation in the Indian currency, which are indeed a matter of concern.

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