1 min read.Updated: 09 Nov 2016, 08:55 AM ISTAmi Shah
Asian markets tumbled on fears that Donald Trump could be headed for a win in the US presidential polls, a move seen triggering risk off trade
Mumbai: Benchmark equity indices are set for a lower start in Wednesday’s trade after the Union government in a surprise move withdrew currency notes with a denomination of ₹ 1,000 and ₹ 500, effective from Tuesday midnight, in an attempt to crack down on black money, coupled with Republican candidate Donald Trump leading the White House race in US presidential elections.
Trump held leads in the vital battleground states of Florida, Virginia and Ohio on Tuesday, clinging to an advantage over his Democrat rival Hillary Clinton in key states that could decide their race for the White House, a Reuters report said.
Asian markets tumbled on fears that Trump could be headed for a win, a move seen triggering risk off trade.
Japan’s Nikkei was down 2.4% while Hong Kong’s Hang Seng Index fell 1.7%.
Nifty futures on Singapore Stock Exchange were down 2.2% hinting at a lower opening in the domestic market.
With voting completed in more than two-thirds of the 50 US states, the race was too close to call in Ohio, Florida, North Carolina, Pennsylvania, and Virginia, states that could be vital to deciding which contender wins the presidency.
“The combination of black money crackdown and the close call on the US elections will impact the market at open If Trump ends up winning, the market will see more pressure," said Ritesh Jain, chief investment officer at Tata Asset Management Co.
In the near term, the government’s move may hit the consumption story for the world’s second-most populous country.
Jain of Tata Asset Management pointed that the consumption story will be hit and the black money economy is a significant portion of the economy.
“This move will push up the value of debt. The bond yields on government bonds and high rated corporate bonds will come down. State governments can come under pressure, as stamp duty collection takes a hit due to the impact on real estate. The move is deflationary in nature. It’s a reset on the system," said Jain adding that the companies in high growth sector with free cash flows will get further rerated.
“Currency (rupee) will appreciate. It will be one more overhang on the exports where margins are also under pressure," said Jain.
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