Karnataka Elections 2018: Markets Set To Be Volatile Ahead Of Results

Karnataka elections 2018 outcome, and the performance of Bharatiya Janata Party (BJP), for which Prime Minister Narendra Modi had campaigned heavily, are likely to determine the fate of equity market indices (Sensex and Nifty) this week. Devendra Nevgi, founder and principal partner of Delta Global Partners, said, "The big market moving event is the Karnataka elections outcome especially BJP's performance. Crude oil prices, US-Iran developments and earnings would be closely monitored."

Markets Outlook This Week. Ten Things To Know

1. The markets will closely watch the Karnataka Assembly poll results, which will be announced on May 15 (Tuesday). Most exit polls, so far, have hinted at a hung 242-seat house, with the BJP expected to emerge as the single largest party followed by Rahul Gandhi-led Congress.

2. On Monday, the Central Statistics Office (CSO) released the macro-economic data points that include the consumer price index-led inflation (CPI) and wholesale price index (WPI). Annual consumer inflation (CPI) accelerated to 4.58 per cent in April, the government data showed on Monday. The rise in consumer inflation is incongruous to the easing of inflation for three months in a row until March when it had eased to 4.28 per cent, driven by lower food prices. A higher than expected CPI would trigger a rise in bond yields, though the weaker IIP data would mitigate some of the rise, he said.

3. The companies that will release their March quarter numbers include Abbott India, Hindustan Unilever, Britannia Industries, Axis Bank, Lupin, Punjab National Bank, ITC, Tata Steel, Welspun India, Hindalco Industries, and Voltas.

4. SMC Investments and Advisors chairman and managing director D.K. Aggarwal echoes the similar sentiments when he says: "Macroeconomic data, next batch of quarterly earnings, trend in global markets, the movement of rupee against the dollar and crude oil prices will dictate the trend of the stock market going forward."

5. The two factors that can add downside to the markets can be triggered by higher inflation on higher oil prices and fall of rupee's value in the currency markets. At the same time, the easing geopolitical tensions can boost the markets, as stated by Vinod Nair, head of research at Geojit Financial Services.

6. The open market operations by Reserve Bank of India (RBI) will help soothe the frayed nerves in the bond market and bring stability in the value of Indian rupee. However, the out flow of foreign funds due to rich valuation is a concern to the market.

7. In terms of investments, last week's provisional figures from the stock exchanges showed that foreign institutional investors sold scrips worth Rs 2,126.74 crore.

8. Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) divested equities worth Rs 2,678.35 crore, or $399.75 million, in the week ended May 11.

9. On technical charts, the underlying trend for the National Stock Exchange's (NSE) Nifty remains "firm". "Technically with the Nifty surging higher and closing above the 10,800 points levels, the underlying trend remains firmly up," said Deepak Jasani, Head of Retail Research for HDFC Securities. He further added that further upsides are likely once the immediate resistance of 10,878 points is taken out.

10. Last week, healthy Q4 earnings and positive global cues including easing tensions between the US and North Korea lifted the key Indian equity indices. However, caution prevailed ahead of the assembly elections in Karnataka. On a weekly basis, the barometer 30-scrip Sensitive Index (Sensex) of the BSE rose by 620.41 points or 1.78 per cent to close at 35,535.79 points. In addition, the wider Nifty50 of the National Stock Exchange (NSE) closed last week's trade at 10,806.50 points -- up 188.25 points or 1.77 per cent from its previous week's close. (With IANS inputs)