The uncertainty over the result of the US presidential election, which is far closer than predicted, will likely keep the market volatile for some time but the focus will eventually shift to local issues, experts have said.
As the outcome is not clear at the moment, the tight race may keep investors away from riskier equities.
"As far as the Indian market is concerned, it may initially react and follow the pattern of the US and other global markets post US elections," said Rusmik Oza, Executive Vice President and Head of Fundamental Research-PCG at Kotak Securities.
"As policy changes may take time to get implemented in the US, we expect the Indian market to get decoupled and come back to local issues, earnings and valuations from early 2021."
It appears it will take longer than expected to get a clear picture of who becomes the next US president. The outcome will now be decided by a handful of states that could swing either way. These states will play a critical role in delivering the 270 Electoral College votes needed to win the presidency.
Due to a surge in mail voting amid the coronavirus pandemic– as well as the states' varying rules for when ballots can be counted-the final results for all the states may take days.
As of now, in-person voting has concluded. Results are pouring in from across the United States.
President Donald Trump has said he will move the Supreme Court over the counting process. It would not be the first time something like this would have been undertaken.
Jyoti Roy-DVP-Equity Strategist, Angel Broking, said it was evident that the race would be much closer than anticipated. "While the Democrats are in the lead not only in the presidential race but also in the House, it is likely to be a very tight race and may go down to the wire," said Roy.
Vinod Nair, Head of Research at Geojit Financial Services, was of the view that political developments in the US with likely measures to be announced by the Fed would drive the market.
The talk of a possible Joe Biden win saw a decline in the dollar, a rise in US treasury yields and outperformance of emerging market (EM) against developed market (DM) equities this month.
Oza said some of this could reverse if Trump gets re-elected. Status quo on most policies with some kind of elevated geopolitical risk, especially on US-China ties, is expected if Trump remains in the White House.
"Fiscal stimulus would continue in the US but at a slower pace, which could be slightly disappointing," Oza said.
A Democrat win could lead to higher taxes and capital gains and tighter regulations, especially for the energy, financial and technology sectors.
He said that the Democratic party is considered to be more socialist so a larger stimulus can be expected if they are voted to power.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.