 "US Presidential inauguration: A historically positive catalyst for equities")
Most emerging markets (EMs), including India, have experienced volatility ahead of Donald Trump's second term.
However, history suggests that the 12-month return for both US and Indian equities after the presidential inauguration day have been positive.
The average one-year return for the benchmark Nifty 50 and US' Dow Jones after the previous nine inauguration days, starting with George HW Bush, is around 30 per cent and 16 per cent, respectively, data compiled by BS Research Bureau shows.
Even the near-term performance for both markets has been positive after a new US President assumes charge.
Currently, the Nifty 50 index is trading around 11 per cent below its record highs in September.
Experts note that stocks tend to be volatile ahead of US elections due to uncertainty around policy changes under the new administration. However, the post-election period is often conducive for equities.
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This time around, most EMs are trading at a significant valuation discount to US equities due to a surge in US bond yields. The market fears that Trump's policies around tariffs and corporate tax cuts could fuel inflation and widen fiscal deficit.
“Historically, while the rhetoric has often been intense, the eventual actions or resolutions have tended to be more measured and rational than initially expected. This could very well be the case again,” said Arindam Mandal, head of global equities at Marcellus.
“Our base case assumes that major powers will act within established norms. If true, it could support reasonable returns over a sufficiently long holding period,” he added.