Sensex Up Over 340 Points As BJP Leads Karnataka Elections

Asian shares are lower today as Japanese and Hong Kong shares show losses. The Nikkei 225 is down 0.1% while the Hang Seng is down 0.9%. The Shanghai Composite is trading down by 0.2%.

Back home, India share markets are witnessing buying interest as BJP is leading Karnataka elections. The BSE Sensex is trading up by 347 points while the NSE Nifty is trading up by 88 points. The BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index has opened the day up by 0.7%.

Sectoral indices have opened the day on a positive note with metal stocks and energy stocks witnessing maximum buying interest.

The rupee is trading at 67.54 to the US$.

Market participants are closely tracking the vote count for Karnataka elections.

At the time of writing, data showed BJP leading Karnataka polls.

There are high stakes involved as the outcome of this election would also determine the direction of the country's reforms and policies in the runup to the 2019 elections.

The final vote count will be known within a few hours. We'll keep a close watch on the developments in this space and keep you updated. Stay tuned.

The US 10-year bond yield edged higher on Monday, as trade tensions eased in the wake of US President Donald Trump's pledge to help Chinese telecommunications company ZTE Corp, which has been penalized for violating US sanctions with Iran. In the news from currency markets, the dollar inched higher against a basket of currencies on Tuesday, as hopes for easing global trade tensions pushed US bond yields higher.

In the news from global financial markets, the Industrial and Commercial Bank of China (one of the top state-run Chinese banks) has launched China's first India-dedicated publicly offered investment fund. As per the news, the bank is urging the Chinese to invest heavily in the fund, stating that the Indian economy is entering the golden age of economic take-off.

The fund is named as the Industrial and Commercial Bank (ICBC) Credit Suisse India Market Fund. It will invest in exchange-traded funds listed on more than 20 exchanges in Europe and the US that are based on the Indian market.

The fund is China's first publicly offered fund for investing in India, state-run Global Times reported.

The above move is said to boost investment in India and also comes just about a fortnight after the first ever informal summit between Prime Minister Narendra Modi and Chinese President Xi Jinping where the two leaders sought to give a new direction to the bilateral ties to tap their economic potential.

As reported, the financial industry will account for the highest proportion in the fund, followed by information technology, alternative consumption, energy, essential consumption, raw materials, medicine, healthcare and other industries.

According to the announcement of the offering, the ICBC Credit Suisse Indian Market Fund (LOF) will be available for sale at both the on-site and off-site markets from May 7 to May 25.

The above development will mean a flood of liquidity pouring into the Indian financial markets.

Also, note that India is seen as an emerging market lately. It was among the three emerging markets in 2017, which gained more than 35% in dollar terms. The other two are Hungary and South Korea.

The BSE Sensex earned a 35.1% return in the dollar terms and 28% in the local currency in 2017. However, this wasn't enough to beat the midcap and smallcap indices. The midcap and smallcap indices saw a sharp increase of 47% and 58% respectively in 2017.

India Outperforms Emerging Market Peers in 2017

The sharp rally in 2017 was due to huge inflows from domestic institutional investors (DIIs) and foreign institutional investors (FIIs).

How the Indian markets perform in 2018 remains to be seen. Although earnings are likely to recover, profit margins could get squeezed as companies face rising input cost pressures. Rising oil prices may prompt the government to abandon fiscal prudence at a time when GST collections have been lower than expected. 2018 will, therefore, be critical for Indian companies to justify their valuations with earnings growth.