Moneycontrol readers' poll: Retail investors prefer Trump over Biden, but experts don't agree

While the focus of the market seems to have shifted to the US elections on November 3, retail investors are of the view that the election win of Donald Trump will make the Indian market happier.

In a social media poll, conducted on Twitter and Linkedin, a majority of respondents favoured Trump over his Democratic Party rival Joe Biden.

The US election is among the most significant events for the markets across the globe. The US will conclude its 59th quadrennial on November 3, 2020, but the influx of postal ballots this year due to COVID-19 is expected to delay the election results.

The US Congress will meet on January 6, 2021, to count the electoral votes and formally declare a winner – until then, emerging markets, including India, could see some volatility.

Retail investors, as per the social media poll outcome, want Trump to retain the power, perhaps considering that he will continue his policies towards China which may benefit India.

In a Twitter poll, 67 percent of the respondents preferred Trump to Biden.

In a Linkedin poll, 55 percent favoured Trump.

While the impact of the US election may not linger, there may be even a knee-jerk reaction globally, experts think.

"There is a high probability of a knee-jerk reaction in equities globally as well as domestically. However, the impact may be short-lived. The broader policy path will continue with or without Donald Trump with some minor changes and economics will prevail over sentiments," said Prasanna Pathak, Head of Equity, Taurus Mutual Fund.

What do market experts say?

Unlike retail investors, market experts and analysts think Joe Biden's electoral win will be good for the Indian market.

“The latest research reveals that if Biden comes to power by winning the White House, it is likely to benefit Indian investors by providing ‘potentially more favorable US trade policies and attract many newbies and experienced investors,” said Ankit Agarwal, Managing Director at Alankit Ltd.

Historical data also favours a Democratic Party (Joe Biden’s party) president.

Data from Vested Finance showed that under a Democratic President, the S&P 500 has given an 11 percent annual returns while under a Republican President, the annual returns have been 7 percent.

Indian market rallied after March 2020 on the expectations of change in government in the US and Biden’s victory. Trump’s victory will impact market sentiments and it may fall sharply, suggest experts.

“Biden's policies and proposals are favourable for Indian companies. Biden victory would mean a strong rally in the market as the economic stimulus will boost the market sentiments significantly,” Vinit Bolinjkar, Head of Research, Ventura Securities told Moneycontrol.

The US election is important for India not only from the economic point of view but on the strategic front too.

However, it is unlikely that there will be a major shift in the policies of the USA for India if a leadership change occurs there.

Experts point out that recent American Presidents - whether Republicans or Democrats - have strengthened the level of relationship with India further.

Of course, there may be some tweaks and twists in the case of leadership change, but on a broader scale, no significant policy-related change is expected.

A Biden victory could bode well for sectors such as renewable energy, cannabis and education whereas a Trump victory will help sectors such as oil, defense and infrastructure perform well.

Viram Shah, Co-Founder and CEO, Vested Finance, is of the view that one should not change his/her asset allocation to the US markets based on the election as it has a short-term impact.

Shah believes Indian stands to benefit in the long-term no matter who is elected as the President of the US.

"As far as the impact on Indian markets is concerned, irrespective of whether Trump or Biden win, India stands to benefit from improved relations with the US as both countries attempt to neutralise the rising power of China," Shah said.

There could be three scenarios after the US elections: (1) Biden wins with Democratic sweep, (2) Biden wins with divided Congress, (3) Status quo.

Global financial firm UBS is of the view that India, Indonesia, and Singapore may be the likely winners out of these three scenarios.

"Under the Biden and Democratic weep scenario, India, Japan, Malaysia, and Singapore appear better positioned mainly driven by the benefit of potentially more favorable US trade policies. On the other hand, China, Hong Kong, Philippines, and Thailand appear likely to lag behind," said UBS in a note.

"Under the status quo scenario, India, Indonesia, and the Philippines are likely to outperform if the Fed policy remains easy for longer. Japan, Korea, and Taiwan would have limited gains through either easy Fed policy or increasing fiscal spending on infrastructure out of the US," said UBS.

"Under the Biden and divided Congress scenario, India and Indonesia are more likely to gain through easy Fed policy, while Japan and Singapore could benefit more from US's more favorable trade," UBS said.

In the long-run, the election outcome is a non-event for the Indian market as it will take it in stride.

"In the long-term, the US elections are a non-event and markets will run their own course. Both candidates are expected to adopt a pro-India stance," said Amar Ambani, Senior President and Head of Research -Institutional Equities, YES SECURITIES.