Markets Tumble As BJP Govt Falls In Karnataka

Markets Tumble As BJP Govt Falls In Karnataka 

In the fortnight gone by, markets remained volatile due to political uncertainty in Karnataka after the state elections. The benchmark Sensex failed to close above its crucial support placed at 35,000. It reversed its gains on May 15 after hitting an intermediate top placed near 35,993. However, plenty of stocks managed to hit fresh all-time highs on the BSE. The proportion of stocks hitting fresh all-time highs were larger than stocks hitting all-time lows. As many as 147 stocks hit fresh all-time highs on the BSE, whereas nearly 130 stocks hit fresh all-time lows, which included mostly small-caps and mid-caps. 

The global markets traded in the green in the past couple of weeks with Hang Seng outperforming other major global indices. American markets continued their uptrend. In the last two weeks, Dow Jones gained 1.47 per cent, whereas S&P 500 and Nasdaq gained 1.51 and 1.23 per cent, respectively. In the European markets, UK’s FTSE100 outperformed its European peers with an increase of 2.80 per cent. Germany’s DAX and France’s CAC 40 gained 1 per cent and 1.5 per cent, respectively. Among the Asian markets, Hang Seng was up 3.51 per cent in the fortnight, whereas Nikkei managed positive returns of over 2 per cent during the same period. China’s Shanghai exchange was up 1.81 per cent. 

On the domestic front, bearish equity sentiment prevailed in the Indian markets in the last two weeks on the back of mixed earnings and the fall of the BJP government in Karnataka. Both Sensex and Nifty fell by over one per cent. All the sectoral indices, except the IT index, traded in the red during the period under consideration. The small-cap and mid-cap indices slipped by 4.23 per cent and 4.54 per cent, respectively, in the two-week period. The Auto index led the downfall in the domestic markets with a loss of 4.64 per cent, followed by Power which fell by 4.37 per cent. The Metal and Realty indices witnessed a decline of 2.65 and 3.38 per cent, respectively, during the fortnight. The IT index added 0.50 per cent, whereas the Bank index remained flat. 

The FIIs have been net sellers, having sold stocks to the tune of Rs 2988 crore, whereas the DIIs have been net buyers and have lapped up equities worth Rs 5678 crore. 

The gold prices slid to a near five-month low as the dollar rose and the demand for safe-haven assets eased after waning fears of trade war between China and the US. Brent crude oil prices hit $80 per barrel for the first time since late 2014 on the back of looming US sanctions on Iran. 

Going forward, unfavourable developments on the macroeconomic front can affect market sentiment, earnings recovery and depress valuations. Investors should brace themselves for an increase in volatility in the coming weeks.