Before the outcome of the US election, key Asian stock indices are trading green on Thursday. Following the cues from its emerging market (EM) peers, the Indian stock market started the day’s session with a gain of more than 1%. The Nifty topped the 12,000 mark, over 150 points. Sensex rallied over 500 points in early trading and is currently trading at 41,145.
The latest reports show that Democratic candidate Joe Biden has garnered 264 electoral votes, while Donald Trump has won 214 seats so far.
Analysts say a Biden win is likely to be favorable for stocks in emerging markets, including India, considering his plans to increase taxes and introduce stricter financial regulation. In this scenario, institutional funds are likely to find their way to Asian equities. Another factor that would give emerging market stocks an edge over developed markets is the next round of stimulus from the new US government.In a market that is already fueled by massive liquidity, further stimulus is seen as positive. Analysts say that fiscal stimulus has been seen in the past to work in favor of emerging market stocks.
Not only these, there are also other factors that make emerging markets a better bet than developed markets (DM). “Better trends in virus management in Asia compared to the US and Europe; strong governments and listed corporate balance sheets, especially in parts of North Asia; stable political climate, especially in parts of North Asia and India; and generally stable and cohesive societies and values that adapt to government dictates on pandemic control measures, unlike the West, and a strong recovery of post-pandemic economic data, especially in China leaking through the rest of the region, “analysts at Nomura Inc said in a report on November 5.
When it comes to India, whoever wins is unlikely to make a material difference in the long run, on the trade policy front. However, immediately, there is likely to be an impact on a handful of stocks in particular sectors.
“From the perspective of the Indian market, the trends driven by the US elections could imply that Indian IT stocks and Reliance Industries Ltd (internet gaming) could gain traction as seen in current trading and cyclical stocks. including banks could be delayed, “analysts at Jefferies India Pvt. Ltd said in a note on Nov. 5.
Analysts at Edelweiss Securities expect TI to benefit from a Donald Trump win along with chemicals / tiles, while Democrats would be better for the pharmaceutical industry and stimulus, the national brokerage firm said in a Nov.5 note. .
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