Over the last two trading sessions the Sensex has risen 1,276 points, or 3.14 per cent, amid growing likelihood of an undisputable victory for US Presidential Democrat candidate Joe Biden. However, since election day, the Sensex has jumped 1,632 points, or 4.1 per cent, and market experts say growth in markets is not about who is winning but more about the fact that a major event was getting out of the way and the new President will pave the way for fresh stimulus to the economy that markets have been waiting for.
“More than who wins the election, the markets have been rising in expectation of the fact that the new President will come and pave the way for fresh stimulus to the economy,” said Nilesh Shah, MD, Kotak Mahindra AMC.
There is a general feeling that while US policies with respect to India may not see a big change despite a change of leadership in US, there is a sense that a more predictable leader is better geopolitically and for the global equity markets.
“I think Biden is a much more predictable person and so the policies would be on expected lines and that should bring more stability. Since equity markets are risk markets, if you can lower volatility on policy front and make it a bit more predictable, it is good for the markets,” said Raamdeo Agrawal, chairman, Motilal Oswal Financial Services.
It is important to note that on Tuesday when it looked that Donald Trump was ahead in the race to 270 then also the markets rose and on Wednesday and Thursday when it emerged that Biden had a higher chance of securing the presidency it again rose.
“It was not about who wins but what mattered was an undeniable victory for either candidate. On Wednesday when it became clear that Biden will have an undeniable victory and the process won’t have to go for a long uncertainty, there was a big rise in markets. Now the gain is on account of a smooth and stable transition,” said CJ George, MD Geojit Financial Services. He further said that while Biden’s victory may mean more saner and predictability of policies, “a more stable geopolitical environment will be good for equity markets globally.”
A look at how various sectors traded over the last three days shows that banking and the IT index have been biggest gainers. Against a Sensex rise of 4.1 per cent over last three days, the banking index has jumped 7.8 per cent and the IT index has risen by 3.9 per cent. Many feel that Biden would be better for IT industry and professionals. In fact he had stated that once elected, he would lift the temporary suspension on H-1B visas. 📣 Express Explained is now on Telegram
Given the fact that Democrats traditionally have been softer on Pakistan and China, while there are some concerns on whether India would enjoy the same level of proximity as was between Modi and Trump, but some feel that since the public sentiment in US is not in favour of China, Biden will have no option but to come together with India to check China’s march. “It is compulsion of global politics,” said Agrawal.
Even George said that while it will take some time for markets to figure out the democrats view on Malabar exercise in which all four Quad countries India, US, Japan and Australia are participating this time, “I think it will continue given the fact that the public view is against China.”
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There is also a sense that a Biden victory will see coming together of the global community as Trump had walked out of various treaties and had taken extreme positions on matters, including the Paris Accord. The global community may come together again as Trump had gone back on several deals including the Paris Agreement on climate change.
There is also a sense that Trump’s exit may also reduce the level of polarisation in the US society and get the country united, which is good for the world and markets.