Biden leading the US presidential race: What it means for D-Street?

Biden leading the US presidential race: What it means for D-Street?


NEW DELHI: At last count, Democrat candidate Joe Biden was leading the US presidential elections with 213 seats against incumbent Republican Donald Trump’s 118. The magic mark to win the US election is 270 seats.
Investors the world over are wishing for the outcome of the US election as early as possible, as trillions of dollars of stimulus hinge on that. A big stimulus package in the US is seen as favourable for emerging markets, such as India.

Shiv Sehgal of Edelweiss Securities expects US stimulus measures to come by November end or mid-December, but said it remains to be seen whether it is worth $1 trillion, $1.5 trillion or $2 trillion.

“There are talks that if Biden wins, both the presidential election and the Senate, the number could be as high as $5 trillion. That would be a big kicker, not only for Wall Street, but even the emerging markets. If you look at where FIIs have been putting money, India and China are the only two markets in the entire Asia Pacific region that are seeing positive inflows for the year to date,” Sehgal said.

Data available with NSDL showed FPIs have infused Rs 47,338 crore in domestic equities so far this year compared with Rs 1,01,122 crore pumped in during Calendar 2019.

Rupal Bhansali of Ariel Investments said markets might have already priced in a Biden victory.

“Markets have been fairly sanguine about the outcome, and they have not corrected materially. There has been a bit of a pullback, but that has more to do with the upswing in Covid cases in Europe. No matter who wins the election, what matters in the US is who takes the Senate. If the Democrats take the Senate, — they already have the House — then they can overturn what is called the Filibuster rules. They will have a super majority to pass legislations. If they are able to get away with that, then a lot of things can open up. Biden has plans and he will be in a better position to execute that plan,” Bhansali said.

“If he does not win the Senate, then not much will change, because it is extremely hard to get legislations passed and we are talking about the status quo either which way — whether Trump wins or Biden wins — on tax rates in the US. That is a risk that the market is not pricing in adequately,” she said.

Hitesh Jain of YES Securities said a stronger chance of the Democrats winning a majority in the Senate implies higher fiscal spending. Jain believes one should brace for a transient selloff in US equities and fall in the US dollar, but gold prices may rally, helped by a tumbling dollar and concerns of higher fiscal spending and potentially rising inflation.

He expects base metal prices to move up as the US-Chinese relationship stabilises and the market starts pricing in a probable trade deal.

Emerging markets have suffered immensely as a result of the recent US- China trade tensions. But under a Biden administration, relations between the two economies could be less fractious, Axis Asset Management said.

For now, Sudip Bandyopadhyay of Inditrade Capital expects some stability to come to the domestic market.

“We strongly believe markets like India will continue a positive bias, and we have seen that in spite of the volatility, Indian markets have been better performing on the back of good September quarter numbers as well as the improvement seen in the macro indicators like the GST collection, vehicle sales etc. If you are a long-term investor and if there is a bit of a dip at some stage, it will be an opportunity for one to accumulate and start building a portfolio,” Bandyopadhyay said.

He likes cement companies, especially the midcap ones such as JK Lakshmi Cement, Birla Corp and Heidelberg. Besides, he also likes IT names such as HCL Tech or Mphasis.

“The US election and US politics will settle down, but opportunities like this may not come,” he said.

Sehgal said most companies that have reported quarterly earnings so far have surprised positively on revenue as well as Ebitda fronts. Management commentaries are also incrementally shifting from “all about cutting cost” to “targeting growth”.

“We remain quite confident that the worst is behind,” he said.

Credit: Stocks-Markets-Economic Times

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