Karnataka Election Result 2023: How the Stock Market Will React After BJP’s Loss?

Stock market experts added that some correction can be expected on Monday but should be seen as a buying opportunity by savvy investors as only the Karnataka Assembly poll was high on the BJP. BJP has no major stakes in the upcoming polls as it is an emerging party in Telangana and in opposition in Chhattisgarh, Rajasthan and Madhya Pradesh. They advised investors to buy mid-cap IT stocks and stocks that have delivered strong Q4 results.

‘Fire Modes’ under scanner

Asked about the importance of the outcome of the Karnataka Assembly Poll, Avinash Gorakshkar, head of research at Profitmart Securities, said: “Following the 2023 Karnataka election result, it is only the BJP that has to prove that they have to save their government in Madhya Pradesh and the need to wrest power from the congress party in rajasthan and chhattisgarh to establish that there is nothing wrong with the modi brand however the market would certainly react to the results of this state assembly and i believe the market can become an ideal sell if this rises to Lok Sabha Polls 2024.”

Avinash Gorakshkar said the long position of FIIs and DIIs could be extended and the market could become a sideways market that usually takes place ahead of crucial meetings and national elections in a big country like India.

“Now major investors like FII, FPIs and Mutual Funds would like to know how the Karnataka assembly election result has affected the Modi brand as Karnataka is an important state for the party to establish itself in South India from a tactical perspective,” said Avinash Gorakshkar.

On how the Karnataka election results will affect the stock market, Ravi Singhal, CEO of GCVL Broking said: “The Karnataka election results are not a surprise and the stock market has already factored in the loss of the BJP in the state assembly polls. however would be an important factor and the market would be watching it closely So in case of a respectful defeat for the BJP where they settle for around 75 seats which seems possible based on the latest trends I don’t expect much correction on Monday and Nifty might be able to secure the current 18,150 support levels.”

Santosh Meena, Head of Research, Swastika Investmart believes the congress victory was an event already priced in by the investors.

While this could have a sentimental negative effect on the market, it’s 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 on a consistent upward trend since April, successfully surpassing the significant resistance level of 18200. Currently, the main resistance level stands at 18440, representing a 78.6% retrace from the previous drop 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 1863018690 range. On the other hand, 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 levels of support during any correction,” he added.

On segments to look to to take advantage of this bottom-fishing opportunity, GCL Broking’s Ravi Singhal said: “Mid-cap IT stocks have delivered better Q4 results and I expect FIIs to take interest in the near future. will show in mid-cap IT stocks. correction. So one should look to Coforge. Birlasoft and Persistent Systems share if they have plans for bottom fishing in possible market correction after the Karnataka election results.”

Ravi Singhal also recommended looking at the companies in the automotive and banking segments that reported promising Q4 results and suggested AU Bank and Kotak Mahindra Bank in the banking segment and Maruti Suzuki in the automotive segment.

disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. We recommend that investors consult certified experts before making investment decisions.