Trump or Biden — Should Indian investors worry?

KS Badri Narayanan Chennai | Updated on October 23, 2020 Published on October 23, 2020

US President Donald Trump and Democratic Presidential candidate Joe Biden participating in the final presidential debate   -  AFP

Regardless of who wins, the market will move forward after some initial volatility

November 3: The big day is just 10 days away for the world’s second largest democracy, the US, to elect its next president. The acrimonious contest between the incumbent Donald Trump and Democratic challenger Joe Biden has divided investment analysts in the middle as much as their political peers.

Popularity vote

If one goes by popularity polls, Joe Biden, at 51 per cent, is leading Trump by a good 8 percentage points. However, these polls are not necessarily a reliable predictor of the winner. In the last big battle, Democratic nominee Hillary Clinton led in the polls by a big margin but still lost to Trump, because the US uses an electoral college system, where popularity does not necessarily vouchsafe a win in the election.

Analysts’ take

While experts across the globe weigh both the candidates, in India, too, many analysts are looking at the advantages and disadvantages of Trump and Biden for investment decisions.

According to CARE Ratings, a second term for Trump will be in a different global economic environment from his first. Hawkish policy announcements not too favourable to India cannot be ruled out especially on the tariffs front and relocation of businesses back to America.

A Joe Biden presidency, too, may not provide any immediate economic gains for India, but the opportunities for dialogue could be better under his regime.

The anti-China rhetoric, however, is likely to prevail under either leader. A Joe Biden presidency may on the whole be beneficial, and even marginally in India’s favour on the trade front, CARE added. Many brokerages are drilling down to sectors that will benefit depending on who wins with most betting on a positive impact on industrials and finance if Trump romps home, with pharma and information technology losing out. According to them, Biden will turn sentiment positive for IT sector.

US and Indian stocks

Sensex The BSE S&P Sensex, which was at 3,783 on May 13, 1998, the day the Bill Clinton administration imposed sanctions on India, slumped to 2,765 by September but recovered partially to end 1998 at 3.055.41. By March 1999, it was back at 3,785 levels and hit the then historical 5,000-mark by October 1999. Eventually, the Clinton administration had lifted the sanction on September 22, 2001.

Similarly, on July 18, 2005, US President George W Bush and Prime Minister Manmohan Singh had issued a historic joint statement renewing the civil nuclear cooperation, ending over 30 years of suspense and suspicions. After this, the relationship between India and the US moved to a different level.

The nuclear deal and the easy liquidity drove the Sensex from around 7,500 (in July 2005) to 21,206 (January 2008) but, then, when the bubble burst post the Lehman Brothers collapse, the Sensex slumped to 7,697-level by October 2008, seeingone of the biggest crashes in India’s stock market history. It took five years for the Sensex to regain the peak, in November 2013.

A mind of its own

These events suggest that the market has a mind of its own regardless of who wins or loses. The election rhetoric may get much media attention, but markets have the uncanny knack of moving on digesting all bad news in the long run though some discomfort cannot be ruled out in the short term. Even a black swan event such as Trump refusing to concede a defeat and contesting the results (a very unlikely scenario) may only a have a temporary effect on the market.

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Published on October 23, 2020
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