Impact On Indian Markets
As Donald Trump & Joe Biden lock horns, all the bears & bulls across continents are cautiously awaiting the results people elections because while the US accounts for just around 5% of the world’s population, it manages to get 20% of the global income, and US trade policies impact many countries including India.
As of now, polls are in favour of Biden winning the elections, BBC Poll of Polls declares potential victory for Joe Biden; necessitate 52% Biden and 43% for Trump.
The US President and his policies have implications on the Indian economy directly especially on our bilateral trade, H1B visas & Indian markets. Reports said that within the year of 2019-20, the full estimated value of the bilateral trade between India and therefore the US stood at $89 bln.
However, now analysts are of a view that Indian markets will benefit from any of the two candidates winning.
What happens if… Trump Wins!!!
If Donald Trump, the present US President & a Republican functionary, is re-elected, he's likely to continue his stance on China which can directly & positively affect India because the manufacturing hub is probably going to be shifted to India. So far, Donald Trump has imposed sanctions on Chinese imports worth $370 bn, and he's likely to continue it.
Apart from that, Trump has good relations with Indian Prime Minister, Narendra Modi and if Donald Trump continues his stay within the White House for the following four years then this relationship will further strengthen and help India economically i.e these personal relations would affect future trade agreements signed by India-US.
IF TRUMP WINS- THESE ARE THE STOCKS TO GO UP
- WALMART
- FACEBOOK
- TWITTER
- J.P MORGAN
- BANK OF AMERICA
- EXON MOBIL
- LOCKHEED MARTIN
- AMAZON
What happens if… Biden Wins!!
Joe Biden is contesting the presidency as a representative of the Democratic Party against the present US President Donald Trump. Biden has hinted at putting an end to the continued tariff war with China.
Last month, in a virtual campaign event to commemorate Independence Day, Joe Biden reportedly said that he would advocate “standing with India and confronting the threats it faces in its region and along its borders; expanding greater two-way trade that opens markets and grows the centre class in both our countries; usurping big global challenges together like global climate change and global health security and strengthening our democracies where diversity is our mutual strength. And where we've an honest conversation about all issues as close friends do”.
In case Joe Biden wins the elections, investors may have to wait and watch the decision or steps taken by the US and Indian government.
IF BIDEN WINS- THESE ARE THE STOCKS WILL GO UP
- ENERGY TRANSFER
- CANOPY GROWTH
- BOOKFIELD RENEWABLE
- WORKHORSE
- TESLA
- MARTIN MARIETTA MATERIALS
- REALTY INCOME
- GOLD
What if…No one emerges as a transparent winner
Indian stock markets are likely to require it adversely if the result isn't within the favour of either of the candidates because all the long-run decisions are going to be on hold and will delay the trade activity moreover.
How Nifty has reacted lately?
In the run-up to US Election results, trade in the Indian markets suddenly caught a cold and the last week of October saw a subdued market movement amid uncertainty over US election outcome and stimulus and on the possible second wave of Covid-19.
Impact on Indian Markets
Whether the White House residents change or remain identical, the US Federal Reserve’s low-interest-rate policy is probably going to continue within the near term.
If Biden claims the throne, then analysts expect someone with a dovish stance to interchange Jerome Powell, Chairman of the US Federal Reserve System. On the contrary, if Trump manages to stay the Presidency, then analysts believe that an unorthodox Chairman will replace Powell who may even consider having negative interest rates.
Falling interest rates will make India a pretty option because it would lead to the continued inflow of cheap capital into Indian stock as well as debt markets.
However, as discussed earlier, if there isn’t a transparent winner then the markets are likely to work out some downside on uncertainty over the US elections outcome and stimulus decisions. Investors don't welcome any quite uncertainty, and markets don’t react positively when uncertainty hovers.
If we glance at Indian stock markets, Information Technology (IT) and therefore the pharmaceutical sector generates sizable revenue from the US.
Software exporting companies and Indian drugmakers are the top-performing components (see the chart below) of the Indian equity market amid the pandemic and also the outcome of the US Presidential elections will have an instantaneous impact on these sectors because the stance of both the candidates on taxation, trade, and immigration policies differs. Trump has been vocal about protecting the roles people citizens, while Biden includes a moderate stance on this subject, as per reports.
Looking at Pharma companies, the Donald Trump-led government has outlined plans to pump money into producing more medications reception. However, Trump may soften his stance over this to enhance India-US relations.
SOME Q&A About US election results.
The US election results historically have come out on election night, when one candidate concedes the race. The only exception in recent history was Bush vs. Gore in 2000. In fact, even President Trump has said that he would want the election results to be announced on election night in many of his speeches. That being the case, why is the talk of uncertainty so much more this time around?
There are two factors that are in play in elections this year that break the norms:
1) Mail-in Ballots: The volumes of early voting in the 2020 elections have been unprecedented. As of yesterday, over 96 million votes have been cast in the early voting phase. To put that in perspective, the total number of votes cast in the 2016 election was 136.5 million votes. To be clear, not all of these are mail-in, a significant portion of these early ballots were dropped off at poll dropoff boxes. Nevertheless, the mail-in ballots volumes is unprecedented. This poses significant logistical challenges to both receiving and counting the results. Ballots could be delayed in the mail and arrive well after the deadlines on which various states close their polls. Some states, like Pennsylvania saw heated legal struggles regarding the deadlines. There is also a partisan angle to this: most of the mail-in ballots primarily comes from Democratic voters, what with the President always asking Republicans to go vote in person. The Pennsylvania case actually ended up in the Supreme Court already, and it was a deadlocked 4-4 decision so they could not overturn the state Supreme Court decision allowing for an extension. However, with the seating of the new Justice Amy C Barrett, these challenges if they wind their way back to SC can go Trump’s way.
2) Trump: The real wildcard in play in this election is the President himself. He has repeatedly called into question the fairness of the elections (calling it rigged). Multiple times, he has refused to gracefully bow out in event of a defeat. It’s possible that for the first time in centuries, a Presidential candidate may outright refuse to concede.
How do you think USD-INR will play out?
Dollar Index is likely to strengthen after Biden. That said, the market is mostly factoring a Biden win. Technical charts are showing a breakout on USDINR. Also if stimulus is delayed, in case of a Biden victory, we will see the dollar strengthening in the short term.
The important dates to keep in mind.
If all goes well, Nov 3 (Nov 4 early morning IST) should be the only date that matters. And by “goes well”, I simply mean that there are no uncertainties in the election result and that a clear winner has emerged.
However, if there is no concession speech by Nov 4, then the next date that becomes interesting is Nov. 6, when Pennsylvania, the key battleground state, stops accepting mail-in ballots.
If there is a lack of clarity even by Nov 6, it opens a whole can of worms. If by Nov 6, there is no clear winner, then it means that Trump has likely taken Florida and is contesting Pennsylvania margins. With the Trump campaign has already raised challenges to the counting of late-arriving mail-in ballots, this could result in a long protracted struggle if the margins of victory are dependent on those late-arriving mail-in ballots. While this has happened very rarely, the last occurrence of such uncertainty in the US election was in the 2000 Bush v Al Gore election.
CONCLUSION
To conclude what we discussed during this article on how US Elections may impact the Indian equity market, here are some of the key takeaways:
Judging by the present term of President Donald Trump, he's believed to be pro financial growth and development. And the relations between India and also the US have strengthened under the leadership of our PM Narendra Modi and Donald Trump.
The global financial market has seen a ‘V’ shaped recovery and this has been mainly due to the joint efforts being put the highest Global leaders and Donald Trump is one in all it. And Trump returning to power should be music to the Indian exchange, and it'll be a significant boost to the Indian manufacturing sector.
Only time will tell the impact of Trump selection or Biden selection on the world and Indian Financial sector. But, we should always defiantly see some volatility within the market in days to come back.
But, clearly, the worldwide economy would need a leader who could be a visionary and shows able leadership in fighting the present Pandemic scenario.
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