THE US presidential elections have always been a global spectacle, with both geopolitical and economic implications for almost the entire world. The main uncertainty, as with any election, is who will win. But after the last elections, when the president Donald Trump refused to concede in 2020, the suspense also concerns the acceptance of the verdict by the candidates. Additionally, an additional layer of uncertainty lies in continued ambiguity regarding the specific policy actions that Republican and Democratic candidates will take in the first few weeks.

The result of all these uncertainties, as well as rising geopolitical conflicts and economic turmoil, is a sotck exchange it teeters beyond limits. As investors shift to safer asset classes like gold and bonds, the Indian stock market has been in a downward spiral for over a month now, falling almost 10% from its peak from the end of September.

Sensex, Nifty tumble on Monday

On Monday, November 4, Indian stock markets continued to experience increased volatility. THE Sensex and Nifty the indexes each fell nearly 2% by midday, reflecting investor caution and aligning with recent market declines. On Monday morning, investors’ wealth eroded by Rs 7.37 lakh crore as stock markets fell sharply above 1,000 points.

“At the end of October, it was a tough month for the bulls, erasing the gains accumulated over the past two months, with Nifty falling more than 6%, one of the steepest monthly declines in recent time, which impacted the structure of the monthly chart…a break below. This week’s support range of 24,100-24,000 could trigger further weakness, possibly pulling prices towards the 200 SMA near 23,500,” says Sameet Chavan, Head of Research, Technical and Derivatives at Angel One.

The turmoil is reflected across major sectors, with substantial declines in IT, pharmaceutical and financial stocks. Leading stocks such as Reliance Industries, Hero Motorcorp, Coal India, ONGC and Tata Motors are all facing significant declines, with all these stocks down more than 3%.

Additionally, the Indian rupee has weakened to record lows and government bond yields have risen, indicating that investors are positioning themselves for a prolonged period of uncertainty. Increased volatility, alongside US election dynamics, creates both caution and opportunities for Indian traders. With strong demand for safer assets, this period could offer gains to those who are correctly positioned, but for the broader market, these fluctuations highlight the risks associated with global dependencies and complex economic ties between states -United and India.

What should retail investors do?

While the Sensex saw a decline of 7% from its recent highs, the rupee touched an all-time low and government bond yields rose by 14 basis points. Expert recommendations also vary on what investors should do at this crucial stage.

Given the growing uncertainties, retail investors should wait before deploying more capital, focusing on high-quality stocks and avoiding frothy small- and mid-cap stocks that may carry increased risks in the current environment, believes market expert Vijay Chopra.

“Retail investors can consider buying shares of good companies with reasonable valuations. This market correction is a good buying opportunity as India’s growth trajectory is intact,” says Shriram Subramanian, Founder and Managing Director, InGovern Research Services.

Overall, Indian investors and market analysts recommend a cautious approach. As the U.S. election creates a unique atmosphere of uncertainty, following fundamental investment principles, such as diversification and long-term planning, can provide a buffer against expected volatility in the weeks ahead. Indian investors are increasingly aware that while the US elections are a spectacle to watch, broader economic indicators and global trends will ultimately shape markets more than any election outcome.

Expectations for the 2024 US presidential election

As the United States prepares for the 2024 presidential election, Indian markets are not immune to volatility. With the vice president Kamala Harris and former President Donald Trump in a tight race, the stakes are high, even for Indian retail investors. The policies of the next US administration could impact global markets, including India.

Three key issues in the US elections – tariffs, immigration and taxation – could directly affect the Indian economy and investor confidence, experts say, according to an analysis by Economic times.

The Trump administration has historically used tariffs to reduce Chinese manufacturing dominance, and if he wins, maintaining or even expanding those tariffs could drive up inflation. The ripple effect could drive up the costs of imports and exports in emerging markets like India, affecting key sectors that trade with the United States like the IT, manufacturing and manufacturing.

In terms of immigration, a possible Trump victory could lead to renewed scrutiny of H-1B visas, which are crucial for India’s technology sector since nearly 75% of these visas go to Indian workers. On the other hand, a Harris administration will likely take a more lenient approach, but the details will depend on Congress. When it comes to taxation, Trump’s policies are often seen as pro-business, but Harris has proposed tax reforms aimed at raising corporate taxes, which could reduce S&P 500 profits by as much as 5%. 5%.

The central role of the US dollar and investments in the global economy means that any volatility in US markets often has a cascading effect on emerging markets. As it stands, uncertainty has already driven up the CBOE Volatility Index (VIX), commonly known as Wall Street’s “fear gauge,” reflecting increased anxiety among global investors. For Indian markets, this could mean a series of short-term fluctuations, but a steady and diversified approach remains essential. History shows that while elections create immediate market ripples, their long-term impacts are generally moderate.

(With contribution from agencies)

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