A Quick Study on How US Elections May Impact Indian Equity Market: November 09, 2016, US Election Day saw one of the most unexpected results in the political history of the world. Hillary Clinton was touted to be the firm favorite of Americans to win the US Presidential Election and was set to become the first-ever Women US president of the USA. However, Surprise-Surprise. At that time, we saw a massive turnaround and Trump emerges victorious.
When Donald Trump beat Hillary Clinton in 2016, here are some of the interesting headlines from major news houses:
However, not only people were hating or celebrating this event. Even the market saw huge volatility during different sessions preceding and after the election results. In today’s article, we will discuss the US presidential results and how US Elections May Impact Indian Equity Market. Let’s get started.
2016 Elections: How did the Financial world react?
To put it into perspective, on the day of the result in 2016, the Nifty 50 was trading near 8,000 levels. On the day of the presidential election result, the market was still in shock (Donald Trump won against the firm favorite Hillary Clinton) and we saw sideways movement in the Global equity market for few sessions. But, post that, we saw a rally in the market, in which all the major indices gained more than 20% in a year’s time. What impressed the market most, was the pro financial growth and development stance of Donald Trump.
One year post the election date, nifty was trading 10,400 levels. Similarly, Dow Jones Industrial Average (DJIA) was trading near 18,300 levels (on the day of the election), and post one year of that, DJIA was trading near the 23500 levels. Growth in the value of the Index by nearly 20%. And even for the Hang Seng Index, we saw a growth of nearly 22% in the value of the Index.
Therefore, from the above figures, the selection of Trump was welcomed by all the global financial markets of the world. We saw growth not only in the absolute values of US benchmark indices but in most of the global benchmark indices.
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Now, next in this article, we aim to provide an insight into the impact of the 2020 US presidential elections. Donald Trump Vs Joe Biden. Who is better for the overall economic development of the world. Considering the ongoing fight against the pandemic, we aim the discover, the political stance taken by both the leaders and the likely impact of their selection on the Global financial world.
Why is US Election important to India?
The answer to the query simply lies in their stance and economic policy. The views of US Presidential candidates are quite contrasting. Just to put in perspective, Joe Biden has a very soft stance against China and he wants to mend the tarnished relationship with China. Donald Trump, on the other hand, has very stern views against China and refers to them as the Corona Virus creator.
While the US account for 5% of the world population, but it accounts for 20% of the global income, and which highlights the economic implications of this presidential election. Therefore, till we get the final outcome of the election, we can expect a range based or sideways movement in the market. And once the results of the elections are out, we can see a fresh infusion of money in the Asian economies. India being one the biggest player in the Asian market, we can see a surge up and infusion of foreign capital in the Indian equity market.
Moreover, according to the survey conducted by Investopedia of various wall street traders and Investors, “47% of the participants are concerned about the election outcome, 35% of the participants are somewhat concerned and 18% of the participants are not concerned about the election outcome”
Fig. According to the internal poll conducted by us on Trade Brains Instagram page, Indians have mostly equal sentiment towards both Trump & Biden (though slightly more inclined towards Biden)
How US Elections May Impact Indian Equity Market?
(Pic Credits: Recent Tweets by US Presidential Candidates!!)
— What if Trump Wins?
As we are all aware that Trump comes from a business background. Most of his policies are pro financial development. If Trump comes back to power, the surge in global economies is expected to continue at a faster pace. And we could see record breaching levels in most of the Global stock market indices.
Moreover, Trump has been very vocal against China. He even refers to the Corona Virus as “Wuhan Virus” or “China Virus”. And he has imposed a lot of sanctions and restrictions against China. And to put his words into actions, he has imposed tariffs on $370 bn worth of goods imported from China. And these sanctions have indirectly made the Indian produced goods more competitive.
And to put the facts into perspective, in the FY 2019-20, the total estimated value of the bilateral trade between India and China stood at a staggering, $89 bn.
— What if Biden Wins?
As mentioned earlier, policies put forth by Biden are more towards mending relations with the allies and that also includes, relations with China. Therefore, if Biden wins the election, we could see the tariff and sanctions against China lifted and which will have an adverse impact on the business volume between India and the USA.
And even the Democratic vice presidential candidate, Kamala Harris has been very vocal against the Indian Government on the Kashmir issue. She has gone to the extent of calling it, ‘Human rights abuse Inflicted by India’.
Trump has even ridiculed Pakistan and shown them their true face but, the Democrats have been very friendly and have shown support towards Pakistan.
How Indian Equity Market may move?
Since the recovery of the Indian Equity market started from the initial slump during the initial COVID-19 days, we have seen the market recovering to new high levels. Sensex has recovered over 53.66% since March 2020 COVID crash. If trump we to be re-elected, we could see the continuation of the rally in the market and new all-time highs could be achieved. However, if Biden were to be elected as president, we could see some initial negative reaction from the market. Anyways, over a long time, it is the policies and announcements of Biden that will have bearing on the Indian Equity market.
To conclude what we discussed in this article on how US Elections may impact the Indian equity market, here are a few of the key takeaways:
- Judging by the current term of President Donald Trump, he is believed to be pro financial growth and development.
- And the relations between India and 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 because of the joint efforts being put the top Global leaders and Donald Trump is one of it.
- And Trump coming back to power should be music to the Indian Stock market, and it will be a major boost to the Indian manufacturing sector.
- Only time will tell the impact of Trump selection or Biden selection on the Global and Indian Financial sector. But, we should defiantly see some volatility in the market in days to come.
- But, clearly, the global economy would want a leader who is a visionary and shows able leadership in fighting the current Pandemic scenario.
That’s all for this article on how US Elections may impact the Indian equity market. Let me know what you think about this topic by simply commenting below. Have a great day and take care!
Hitesh Singhi is an active derivative trader with over +10 years of experience of trading in Futures and Options in Indian Equity market and International energy products like Brent Crude, WTI Crude, RBOB, Gasoline etc. He has traded on BSE, NSE, ICE Exchange & NYMEX Exchange. By qualification, Hitesh has a graduate degree in Business Management and an MBA in Finance. Connect with Hitesh over Twitter here!