The attack on the US Capitol on January 6 briefly shook markets across the globe but the impact would be temporary at best as Democrats won control of Congress, which could pave the way for stimulus measures pushing the dollar further down, a positive for emerging markets like India.
News report on January 7 said Congress had affirmed Joe Biden's electoral college victory over President Trump. The news put to rest the uncertainty in equity markets. The majority will allow Biden to push through policies such as more fiscal spending and higher taxes.
“With the Georgia election outcome, the uncertainty in the US seems to be coming to an end. And, market always prefers certainly, negative though it might be. Of course, here the outcome doesn't seem negative,” Kunj Bansal, CIO, Karvy Capital, told Moneycontrol.
The development in the US is likely to continue to add to the positivity created by loose monetary and fiscal policies. Loose monetary policies adopted by the central bankers led to more than Rs 1 lakh crore of flows into Indian markets in 2020.
When the liquidity is in abundance, the market would usually ignore any negative news flows and focus on more stimulus measures to support the economy.
“The result of the Georgia Senate runoff is overall positive for the markets as the democrats will now effectively be controlling both the houses of parliament. Post the Georgia runoffs, the Democrats and the Republicans will have 50 seats each in the Senate, with vice president Kamala Harris having the tie-breaker vote,” Jyoti Roy, DVP, Equity Strategist, Angel Broking Ltd told Moneycontrol.
“This will make it easier for the Democrats to push through legislations, especially on stimulus measures. However this increases the possibility of tax hikes for corporate America down the line,” he said.
Roy is of the view that for the time, the markets will ignore any likely negative fallouts of the Georgia Senate runoffs like possible tax hikes that are likely to happen after 2021. In the near term, markets will focus on the increased possibility of more stimulus measures.
Here’s what experts said about the impact on Indian markets:
Gaurav Garg, Head of Research at CapitalVia Global Research Limited
Democrats won both Georgia Senate seats as final votes were counted on January 6, serving President Donald Trump a defeat in his last days in office which might have paved the way for President-elect Joe Biden’s on its progressive agenda.
A win for Democrats might add stability to the global market over stable governance. Dow Jones jumped more than 500 points which gave a good opening for Asian markets as well.
As far as Indian markets are concerned, equities might continue to be on an uptrend, especially for technology stocks.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services
The infamy of the US Capitol has been brushed aside by markets. The Biden presidency with a Democratic Senate might push for higher fiscal stimulus pushing the dollar down further. The dollar index has slipped to less than 0.85.
The US tech stocks are likely to be impacted since valuations are hard to justify. In our markets, too, valuations are getting stretched. Profit bookings are likely as reflected in the sell figures in the cash market from both FIIs & DIIs.Disclaimer
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