US election results, Sensex, Nifty: US voters have casted their ballots and the vote counting is underway, with early trends suggesting the Republican candidate Donald Trump taking a lead against his Democratic opponent Kamala Harris. A Harris win will mean continuity of the Biden administration policies, while a Trump win could lead to tariff wars, but also favorable corporate tax regime and low regulatory burden. It may raise hopes of ease in geopolitical tensions. This may lift market sentiment, at least in the short term, analysts said.
Investors may take a sigh of relief if Harris ensures a Democratic continuity, as it will put an end to political uncertainty. In the medium term, however, it may matter little which party comes to power, as historical study of domestic stock market trends showed no clear trends under different US regimes.
The present US president Joe Biden, a Democrat, took office on January 20, 2021. Since then, US indices Dow Jones and S&P500 delivered returns of 57 per cent and 70 per cent, respectively. Nasdaq, in fact, surged over 140 per cent during this period. Against this, Nifty delivered a 75 per cent return in the Biden's tenure .
Former US president Donald Trump, a Republican, was in the office from January 20, 2017 to January 20, 2021. During his tenure, Dow Jones gained 45.3 per cent, S&P500 advanced 52.8 per cent and Nasdaq climbed 77 per cent, but Nifty underperformed the three indices, delivering 38 per cent returns.
"A Harris presidency would likely be a continuation of the Biden doctrine, though she is an unknown quantity at this time, the long-term strategic partnership would continue. There would be, however, some immediate issues surrounding the recent incident involving Khalistani extremists. The big challenge of a Trump presidency would be the tariffs - though China is the main target, India will also feel the effects. Also, the impact of Trump's domestic-oriented policy is a key imponderable at this point," Emkay Global said.
In overnight trade, Dow Jones Industrial Average climbed 427.28 points, or 1.02 per cent, at 42,221.88. The S&P 500 index also jumped 70.07 points, or 1.23 per cent, to 5,782.76.
The US economy has been running a high trade deficit for the last few years and the foremost promise of Trump's presidency has been to reduce this deficit burden by levying taxes on goods and services being imported in the US.
"However, the imposition of tariffs is a double-edged sword as these tariffs might help reduce the trade deficit but will aid inflation on the upside as imported goods will become expensive. Please note that the US economy is already grappling with persisting elevated core inflation for the last few years. Any possible upside on inflation will only delay rate cuts by the US Fed," said Nitin Aggarwal Director of Investment Research and Advisory at Client Associates.
Emkay Global said a Democratic sweep (Harris) could trigger a fresh wave of selling, and a significant correction from here (5 per cent-plus), which should be bought into, as the impact on the Indian economy and markets is marginal. A Trump win may trigger a short-term rally, but the brokerage is unsure of its sustenance due to India's earnings momentum and valuations.
The medium term play for India may not differ in either Democrat or Republican regime, it said.
In recent weeks, a combination of stronger US economic growth data and market anticipation of a potential Trump victory has led to higher bond yields across the curve, UBS noted.
"We now believe that yields are too high, regardless of who secures the presidency. Our 10-year yield forecast is 3.5 per cent for June 2025. We do not expect the election result to shift the Fed from a path toward lower interest rates, and inflation remains on a downward trajectory," the foreign brokerage said.
"Given the geopolitical dynamics, the India-US bilateral ties in defense, trade, and strategic sectors would be impacted. The US is a leading investor in India, particularly in technology, infrastructure, renewable energy, and manufacturing sectors. India’s exports to the US including IT services, pharmaceutical drugs, and gems and jewellery could take a hit because of higher tariffs, said Manoranjan Sharma , Chief economist at Infomerics ratings.