Is Biden’s Victory Good or Bad for the Indian Market?
After a suspenseful and neck-to-neck competition for the post of US President, Joe Biden emerged as the winner over the incumbent, Donald Trump. This marked Democrat Party’s victory over the Republicans. Analysts consider this to be a good move for the Indian market.
Biden has earlier served the US as the Vice-President under Barrack Obama and is now set to be the 46th US President. A woman of Indian origin, Senator Kamala Harris, 56, is set to be the first-ever woman vice-president elect of the country.
This, however, does not point towards any significant policy change as could’ve been the result of a ‘Blue Wave’. The Republicans are still likely to hold the Senate. This shall prevent Biden from bringing any major tax hike or policy change that can affect big tech companies.
In fact, Biden’s victory is expected to work in favor of the market by instilling confidence amongst the investors due to the reduction in policy uncertainty.
Director at IIFL Securities, Sanjiv Bhasin, said, “Whether Trump or Biden comes, the US stimulus will be large, while yields are at an all-time low and liquidity in the market is adequate."
Jim McCafferty, Global Markets Research at Nomura, believes that Biden’s victory shall bring longer- term certainty for the entire world.
There is, however, a possibility of a feeble increase in corporate tax rate with Biden’s victory.
Pankaj Pandey, Head of Research at ICICI Securities said, “Biden may not be able to push his agenda of increasing the corporate tax rate from 21 percent to 28 percent.
Though Biden has denied it earlier, Bhasin believes that we’ll have to wait for him to take up the position to be actually able to comment something concrete.
Investors are also keeping a keen eye on the overall seats in the House and Senate.
Brokerage firm Centrum Broking believes that the current trend points towards no majority in the Congress as Democrats are expected to gain a majority in the House will republicans in the Senate.
Centrum added that this brings things to the negotiations between the democrats and Republicans on a possible fiscal relief bill.
Centrum also pointed out that while Biden’s legislative agenda might be less growth-friendly, his expected spending plan, expected certainty in trade policies and his proposals to tackle COVID is likely to allay the tax raises’ negative growth.
The US-China rhetoric is expected to significantly reduce under Biden.
Centrum said, “On balance, under Biden too, a China trade war is likely to continue, but his intention of rebuilding of alliances elsewhere (against levying tariffs) is most likely to suppress corporate business uncertainty, that has been disrupting business sentiments. Thus, his victory can be perceived as growth positive in the medium-longer term," Risky assets including emerging market (EM) currencies might also be positively impacted according to the brokerage.
To quote Centrum, “Net tighter fiscal policy (tax rate increase) under Biden and a return of multilateralism is initially a dollar negative, where a benign dollar decline unfolds as world trade volumes will slowly recover, triggering commodity reflationary trade. Overall, the trade is likely to turn against safe havens (USD, JPY, Gold, etc.) in favor of riskier EM currencies."