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Karnataka poll disappoints Dalal Street

Karnataka election result outcome would be crucial for the markets and turned volatility heat map on the extreme. Last Tuesday, Nifty made high of 10930 on BJP winning 104 seats but corrected as it could not encounter majority to claim the government. Nifty lost 1.94% week on week and closed at 10596 . The Mid and Small cap Indices continued to underperform for the fourth week and corrected sharply by 3% and 3.5% respectively. Bank Nifty also lost 2% led by PSU banks stocks which lost 6.5% on concerns of asset quality worsening, rising NPAs and rising Bond yields. All sectors ended in the red except FMCG which gained 1.3% on better results performance and double digit volume growth. HUL, Asian Paints and Britannia are trading at their new life highs. FIIs sold equities worth 1497 crores while DIIs bought worth 2026crores in the last week.

In the last week highlights, Karnataka election dramatic twist turned into political battle which played a spoil sport and dragged down the markets already fretting over the impact of weakening INR which touched to 68.11 lowest in last 16 months and Crude price which surged to $80 highest since November 2014 on concerns of renewed US sanctions on Iranian exports which will reduce Oil supply in already tightening markets. India’s April month trade deficit widened to $13.72bn on rising Oil imports.

No major events in this week except US and Euro Services and Manufacturing PMI and FOMC meeting review minutes on Wednesday. In the ongoing corporate earnings season companies like Colgate, Petronet LNG, Bata, Cipla, Dr. Reddy, HPCL, IOC, SBI, Grasim, Motherson, Tata Motor etc. will announce their Q4’18 results.

In this week, in the absence of any major global data, markets will take cues from the outcome of the floor test which will end the impasse over of Karnataka government formation. Market focus will revert to macroeconomic data like INR, Crude, Bond yields, monsoon development and corporate earnings etc. which will drive the sentiments.

Technically on weekly charts, Nifty made a “Bearish Engulfing” pattern with negative RSI cross over which indicates weak trend. Last week, Nifty corrected from the high of 10930 to 10589 breaching crucial support of 10630 on the closing basis. For the week, Nifty support levels are at 10450 and 10400 while resistance remains at 10650 and 10700 levels. For the week, Nifty trading range could be 10400 to 10750.

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