US ELECTIONS – INDIAN MARKETS KA KYA HOGA?

This is a very crucial election – the question is not about a Democrat or a Republican at all; it is all about whether or not Trump will win again. For many of us, he is a leader who has made America into one big joke and another four years of him will mean more chaos, more embarrassment and more racism and protectionism – he will only be further emboldened. Biden is no Obama but he is a Democrat and more secular than Trump.

For us Indians, many are of the opinion that Trump is very India friendly and will do us good to have him around for four more years. Yes, he has warmed up to India but let’s not forget, he is no one’s friend in that sense. So, if we think that him coming back will mean more India-friendly policies, that’s not going to happen; or else the current H1-B restrictions would have never come. Let’s understand here that politics will always take precedence, friend or no friend.

There is the fear that Biden is China-friendly and Kamala Harris’s stand on Article 370 was pretty fierce against India. But one thing even Biden would have understood that he cannot really go back-slapping with the Chinese as the mood in his country itself is against them, actually, world over. And its unlikely that he will rollback the tariff war any time soon. Thus being on the sidelines and voicing opinions is one thing but when on the hot seat, it’s a different perspective altogether.

Well, politics apart, how do the results impact the Indian stock markets? To put it simply, not much. Irrespective of whoever gets elected, the Indian markets will move based on its own policies, Bihar outcome, economic data and earnings.

There are three situations we are looking at:

If Trump wins – the market will not zoom into the stratosphere; undoubtedly, it will be happy but after the initial spurt, it will be back to business as usual. Trump winning will mean status quo for us.

If Biden wins – the market might initially show some volatility and negative bias but eventually, domestic issues will rule the sentiments. Right now, immediately, a Biden win means nothing for us; it is only next year when he makes policies that we will know the impact. IT and pharma companies, even under Trump are not exactly having it easy so basically, nothing substantially will change. Yes, on the geopolitical level, we could see change but then our issues with China and America’s issues are totally different. And all said and done, even if Biden wins, the uncertainty over the destiny of the Senate casts questions about the scope of the Democrats victory in the real sense.

If Trump does not accept the verdict – the US markets are sure to see a sell-off. There will be a major spike in volatility as this indicates political instability. Gold prices will shoot up again and US markets will remain low till this is sorted out. For us, initial reaction could be negative but then, it’s really not our problem, isn’t it?

More than the outcome, what could set forth a strong rally would be a stimulus – Trump has promised a much bigger package than Biden. But see the underlying fact here – both are promising a stimulus; so either wins, a stimulus is a certainty and that means that irrespective of whoever wins, the markets will rise! Trumps stimulus will favor the rich and that means more money in their hands and will make its way to emerging markets. And Biden’s stimulus will favor the middle and lower class, which means demand could see a spike up and that bodes well for the economy.

All in all, we hope this election gets over with a decisive victory so that the world can get back to business as usual.