Karnataka verdict hits market sentiment

PALAK SHAH Mumbai | Updated on May 15, 2018

The fact that BJP may no more be riding a wave of public sentiment that saw it win Assembly elections in State after State on the back of a huge majority, hurt the stock market rally on Tuesday after the Karnataka poll verdict. Key equity benchmarks Sensex and Nifty had managed to rise over 1 per cent in the early trading session when the BJP was leading in over 100 seats. However, the indices gave up all the gains to close in the negative territory as final results by 3.30 pm showed BJP had fallen short of a clear majority, and a Congress-JD(S) coalition government was a possibility.

Taking stock of value

Analysts were of the view that benchmark indices that were at historic high levels could look for more rational valuations as markets start taking a realistic view of the BJP’s position in the upcoming Rajasthan and Madhya Pradesh polls, where it will face the threat of anti-incumbency factor, ahead of General Elections next year.

“Fundamentally, stock markets need to correct as earnings and other economic factors do not support the current levels,” said the CEO of institutional equities at a Mumbai-based brokerage house. “Even the political situation could keep traders on their feet post whatever happened in Karnataka,” he added.

Banks slide

The banking crisis may not be over yet as the RBI last week asked Dena Bank to stop lending activity. Prior to that, the apex bank had ordered the same to Allahabad Bank. Selling pressure was visible in other banking stocks too, as the market anticipated more such directions from the RBI in the coming days.

The stock of Dena Bank fell 5 per cent, while the Allahabad Bank scrip tumbled nearly 9 per cent. Punjab National Bank, which has been under a cloud since February, was down nearly 4 per cent. The mid- and small-cap indices fell between 0.5 to 1.2 per cent, resulting in poor market breadth as there were more declining stocks than advancing ones.

Weak Chinese economic data and lack of progress on trade tariff issue between the US and China too hit investor sentiments. Adding to the woes, the rupee fell on Tuesday plunged to a 16-month low to close at 68.07 to the dollar due to hardening global crude oil prices and strengthening dollar. The domestic currency saw one of the steepest single-day falls of about 56 paise in recent times. Intraday, the rupee touched a low of 68.13 a dollar and a high of 67.45. It opened about 17 paise weaker at 67.68.

Published on May 15, 2018

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