The markets have intense spells when politics prevails over everything else in directing sentiment. Closer to every general election, this trend returns to haunt the markets. But, the ability of politics to drive sentiment is influenced by how much the outcome of the election will drive change. If change is likely to be significant and for the better, the markets can run up ahead of elections. But, if the change can create policy uncertainty, political instability or a weak government then the markets will turn edgy and nervous.

The Karnataka verdict has the capacity to make the market edgy. But, it needs more such follow-up verdicts to make the markets nervous. Political instability can lead to economic instability. The markets will be constantly looking out for signals that guide towards both.

The coming months will see a more sober Market mood as politics takes centre stage. Any negative news will make the markets see red. The volatility and uncertainty will surely throw up some interesting investment opportunities.

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