Karnataka election results: How stock market will react after BJP’s loss?

Stock market experts went on to add that there can be some correction expected on Monday but it should be seen as buying opportunity by smart investors as only Karnataka assembly poll was on high stake for the BJP. In upcoming major assembly polls, BJP has no big stake involved as it is an emerging party in Telangana and is in opposition in Chhattisgarh, Rajasthan and Madhya Pradesh. They advised investors to buy mid-cap IT stocks and those stocks that have delivered strong Q4 results.

‘Brand Modi’ under scanner

Asked about the importance of Karnataka Assembly Poll outcome, Avinash Gorakshkar, Head of Research at Profitmart Securities said, “After the Karnataka election results 2023, it’s only BJP to prove as they have to save their government in Madhya Pradesh and wrench power from the Congress party in Rajasthan and Chhattisgarh to establish that there is nothing wrong with the brand Modi. However, market would definitely react to this state assembly results and I believe that market may become an ideal sell on rise till Lok Sabha Polls 2024.”

Avinash Gorakshkar said that long position by FIIs and DIIs may get prolonged and market may become a sideways market that generally happens ahead of crucial assembly and national elections in big country like India.

“Now big investors like FII, FPIs and mutual funds would like to know how this Karnataka assembly election results have impacted brand Modi because from tactical perspective, Karnataka is an important state for the party to establish itself in southern India,” said Avinash Gorakshkar.

On how Karnataka election results will impact stock market, Ravi Singhal, CEO at GCVL Broking said, “The Karnataka elections results are not a surprise and stock market has already discounted assuming BJP’s loss in the state assembly polls. However, loss margins would be an important factor and market would bee keenly watching on it. So, in case of respectful defeat for the BJP where they settle at around 75 seats, which looks possible from latest trends, I don’t expect much correction ion Monday and Nifty might be able to safeguard its current 18,150 support levels.”

Santosh Meena, Head of Research, Swastika Investmart believes the Congress win was an event that was already priced in by the investors. 

“While this may have a sentimental negative impact on the market, it is important to note that much of this outcome has already been factored in by investors. Therefore, it is unlikely that we will witness a significant reaction from the market in response to this development,” said Meena.

“The Nifty has been displaying a consistent upward trend since April, successfully surpassing the significant resistance level of 18200. Currently, the key resistance level stands at 18440, which represents a 78.6% retracement of the previous decline from 18888 to 16828. While there is a possibility of some profit-taking around this level, a break above it could potentially lead to further gains towards the 18630–18690 range. On the downside, the immediate support level is at the 9-day moving average (DMA) of 18200, followed by the 20-DMA at 18000, with a cluster of 100 and 200-DMA at 17800, which would act as significant support levels during any correction,” he added.

On segments that one should look at to take advantage of this bottom fishing opportunity, Ravi Singhal of GCL Broking said, “Mid-cap IT stocks have delivered better Q4 results and I am expecting FIIs to take interest in mid-cap IT stocks in upcoming correction. So, one should look at Coforge. Birlasoft and Persistent Systems shares if they have any plans of bottom fishing in possible market correction after the Karnataka election results.”

Ravi Singhal also advised to look at the companies in auto and banking segment that has declared promising Q4 results and suggested AU Bank and Kotak Mahindra Bank in banking segment and Maruti Suzuki in auto segment.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.