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.