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U.S Elections and its effect on Indian market November 07 2020U.S Elections and its effect on Indian market

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Impact of U.S. elections on Indian stock market

Republican candidate Donald trump and democrat candidate Joe Biden without a doubt this has to be the most tightly contested elections in the US that too in a highly polarized environment. The uncertainty of who will lead the most powerful country in the world for the next 4 years is truly turning people into serious discussion especially the investors who have turned themselves on their toes. The counting of the votes has thrown up an inconclusive verdict as of now. A candidate to be elected as the president of the U.S, he or she requires a minimum of 270 seats in Electoral college.

Under the American model of election, the people do not directly cast a vote for their candidate, instead they cast a vote for electoral member from each state who represent the respective parties and respective presidential candidate. And these electoral members who get elected they become part of the electoral college which in turn elects the president on 14th of December. The results of the 2020 US election are yet to be announced, but media reports suggest that Biden is leading Trump in the overall voting tally for the Electoral College.

Things may change as the margins in several battleground states are narrowing. Yet, Trump has moved the tribunal over the ballot counting process in three states.

Effect of U.S elections on Indian market.

It may not mean a significant policy change or a tax increase if Biden wins, which could have occurred in the case of a ''Blue Wave''. Because Republicans are likely to hold on to the Senate, the presidential race of Biden may not bring policies that could undermine large technology companies or bring about drastic policy changes.

The victory of Biden is most likely to be a favorable outcome for markets because, by reducing political uncertainty, it will inculcate confidence among investors. In addition to the presidential election, investors have been keeping a close watch on the House and Senate total seats.

If Biden wins, you can expect Big Tech to face greater regulation and / tax scrutiny, which means a potential hiccup for Indian IT, while pharmaceutical firms may benefit from increased government spending, a boon, but could have higher price concessions for Indian businesses.

We could have a subsequent stock market rally and a stronger US dollar if Trump resumes the presidency, as investors would be satisfied with the fact that US corporate taxes will stay low. Trump's victory on the commodity front would translate into a weaker tone for precious and base metals, with non-ferrous complexes being the most vulnerable, weighed down by the possibility of increased trade tensions with China.

For India, who wins does not make any materialistic difference in the long run, but in the short term, along with chemicals and tiles, a Trump victory is likely to help IT, whereas a Biden presidency will be better for pharma. For volatile assets, like emerging markets (EM) currencies, Biden's victory is favourable.

Brokerage firm Centrum Broking pointed out that it seems that there will be no majority in Congress, i.e., looking at the ongoing trends. A majority in the House is likely to be won by Democrats, while the Republicans are likely to gain control of the Senate.

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