Investors in India are nervously awaiting the outcome of the US presidential election in which Democrat Hillary Clinton held a narrow lead over Republican Donald Trump in most pre-election polls.
There could be implications for Indian companies—mainly those in the IT and pharma sectors—if either of them wins the election, as these sectors derive a sizeable revenue from the US.
“If Clinton wins, Indian pharma companies will be adversely impacted as her focus is on reducing medicine costs and, prices may come down to that extent,” said Nilesh Shah, managing director of Kotak Mahindra Asset Management Co.
Echoing Shah’s sentiments, Rohit Gadia, chief executive officer of investment advisor CapitalVia Global Research, said a win for Clinton may lead to drugs price regulation in the US, affecting Indian drug makers.
A Trump win, on the other hand, may weigh on the information technology and interest rate-sensitive sectors in India, Gadia said.
“IT will definitely be impacted because a part of the outsourcing business comes from the US. A Trump presidency is negative for this sector because he is in the camp which is likely to tighten rules related to outsourcing.”
A Trump win may lead to higher fiscal spending, and that may push up interest rates in the US, said Shah of Kotak. “That will adversely impact US rate sensitive sectors and in turn have a cascading impact on rate sensitive sectors here,” he added.
However, it all depends on actions by the new president, post the election, Shah said, adding that markets have largely discounted a Clinton win, and if Trump came to power, the world markets would react adversely.
With hours to go before Americans vote, Democrat presidential nominee Clinton has about a 90% chance of defeating Republican Trump in the race for the White House, according to the final Reuters/Ipsos States of the Nation project, a Reuters report said.
All eyes are also on the dollar, and any sharp moves will weigh on emerging market assets.
“It all depends on how the currency plays out. If dollar starts losing its steam, then the equation will be different for the US. FIIs (foreign institutional investors) will start pulling out from US markets, and emerging markets stand to gain to that extent,” said Deven Choksey, group managing director of KRChoksey Investment Managers Pvt. Ltd.
The dollar index, which tracks the US currency’s movement against six major counterparts, has declined in eight of the nine previous sessions, but eroded only 1.1% in the period, thanks to a 0.7% recovery on Monday.
FIIs have been net sellers of Indian shares in 14 of 17 sessions to Monday, and have offloaded more than $1 billion of shares in the period. India’s 30-share benchmark Sensex, which gained a mere 0.2% in October, has already shed 1.2% so far in November.
“A Trump victory would probably usher in a period of uncertainty for the markets and lead to an initial risk-off mood in markets. If elected, the business magnate and television producer may seek to implement a program that represents a rupture from the past and creates additional uncertainty with regard to trade, budget and monetary policies,” NN Investment Partners B.V. said in a report on Monday, on the world markets.
Emerging markets may be hit especially hard as investors fear protectionist measures that would seriously impact US imports from emerging economies, NN Investment Partners said.
“A win by Clinton, who is likely to pursue the policies of her predecessor, would probably be welcomed by markets, at least in the short term, and could result in a relief rally followed by an investor re-focus on fundamentals,” NN Investment Partners said, adding that a Clinton presidency could also be good news for emerging markets.
Some do not expect big moves for the Indian market, immediately after election results are announced.
“Nothing will change for the Indian markets immediately after the election results. We will have to wait to see how they act once they are elected. My reading says that whatever one says before elections and whatever happens after that are different things,” said Choksey.