US Election 2016: Wall Street bets on Clinton win; how will Dalal Street react?

At least five major polls on Monday showed Clinton had lead over Donald Trump, with one showing Clinton enjoying a six percentage-points advantage

With the Federal Bureau of Investigation (FBI) absolving Democrat US Presidential candidate Hillary Clinton of the charges of using a private email server as the Secretary of State during the first Obama administration, the prospects for her victory in US elections have once again brightened. While people may widely believe Clinton (seen as Obama 3.0) winning the White House race is a positive for markets, data suggest the US market has not been kind to democrats on the verdict day.

In the past five US elections, democrats have come to power on three occasions; of these, the US markets have reacted negatively on two. On November 7, 2012, and November 5, 2008 – the days the results to the two previous elections were announced – the benchmark Dow Jones Industrial Average slipped 2.4 per cent and 5.1 per, cent respectively. On both these occasions, democrat nominee Barack Obama was elected as the US president. Dancing to the tune of Dow Jones, domestic BSE benchmark Sensex also plunged 4.8 per cent on Nov 05, 2008, but it rose marginally (0.5 per cent) on Nov 07, 2012.

In 1996, the Dow Jones had gained 1.6 per cent after democrat candidate Bill Clinton won the elections. Republican nominee George W Bush took over the reins from democrats in 2000 and was re-elected in 2004, following which the index slipped 0.4 per cent, and gained 1 per cent, respectively.

IN WATCH MODE

Overnight, breaking a nine-day losing streak, Wall Street recorded its biggest one-day percentage gain since March 1, while Sensex settled the day 132 points higher in Tuesday's trade.

While it is hard to predict which course the market will take on Wednesday, as historically market performance around the US Presidential elections has not exhibited any consistent pattern, global brokerage Citigroup has come up with a forecast. The brokerage estimates US equities to fall by three to five per cent immediately if Trump is elected President. The global brokerage does not see significant moves in the market if Clinton wins.

Meanwhile, at least five major polls on Monday showed Clinton had a lead over Donald Trump, while one showed Clinton might be enjoying a six percentage-points advantage, according to Reuters.

Back home, domestic brokerage firm Edelweiss Securities noted local stocks were expected to take a tumble, in line with world markets, if Trump won.

“In case of a Trump win, the US S&P 500 may see an appreciable decline in the short term, but its long-term uptrend may not be altered. Indian markets are expected to decline in sympathy with other global markets but will offer a great buying opportunity if it arrives,” the Edelweiss report said.

Rohit Gadia, CEO, CapitalVia Global Research echoed a similar sentiment. “We believe domestic bourses are likely to be extremely volatile in case of a Trump Presidency, in tandem with global stocks, due to his questionable economic proposals. On the other hand, a Clinton win should bring a mildly positive impact to the market,” said Gadia.

Sectorally, IT and pharma sectors stand vulnerable to this event.  “Although IT has no great correlation with S&P 500, it will definitely be impacted because a part of the outsourcing business comes from the US. Trump presidency is negative for IT firms as he is expected to tighten outsourcing norms. On the other hand, a Clinton win will affect the pharma sector due to the possibility of US drugs price regulation,” said Gadia.