US election 2016: For Indian markets, Hillary will be a relief but for short term

Every 4 years in early November, the United States of America goes through a rigorous Presidential nomination process. A US President can serve a maximum of two 4-year terms. As we know, President Barack Obama – a Democrat – has been the US President since 2008.

There are two major political parties in the USA: The Republican Party and the Democratic Party. Each party selects its “nominee” through a rigorous process of campaign rallies, debates, interviews, all of which is covered through extensive media coverage. One by one, the Republicans eliminate a contender (as well as the Democrats), and eventually we have one nominee on each side.

 US election 2016: For Indian markets, Hillary will be a relief but for short term

Republican presidential nominee Donald Trump and Democratic presidential nominee Hillary Clinton

This year, it’s Donald J Trump that has been appointed as the Republican nominee. Hillary Clinton, wife of former President Bill Clinton, is the Democratic nominee.

The two candidates could not be more different. Secretary Clinton has more than 30 years of political experience. If Hillary wins, she would be the first woman to become the President of USA. It’s safe to say that she knows how the political system works to a fair degree of precision. Donald Trump is an enigma that nobody seems to know what to make out of. When he announced that he would run for Presidency, many thought it was a publicity act.

After all, here was someone with zero political experience (and uses that to his advantage, claiming that he’s not “one of them”). He appeals to every angry and frustrated American voter. He claims to be a Republican, but most Republicans are afraid to openly support him and his rather extreme views. As he kept defeating each Republican contender and it became clear that it would be him versus Hillary in the final showdown, the USA woke up.

After a series of 3 debates through which Clinton handily defeated Trump, Clinton took a lead in the national polls that seemed unsurmountable. And then, right when it seemed that Trump had no way to climb his way back, the unexpected (or expected, since we are talking about Donald Trump) happened: he surged in the polls. Clinton’s “email scandal”, for which she had been cleared of any any wrongdoing in the past, was brought back into the news at possibly the worst possible time.

And as it stands, Trump is now neck and neck with Clinton in the polls. A celebrity billionaire with zero political experience who wants to ban certain ethnic groups from immigrating into the country, wants to build a physical wall between the USA and Mexico. And with zero foreign policy experience Trump might become the leader of the free world in a matter of weeks.

So, how does this matter? We’re going to break down what could happen to the Indian markets if either Clinton or Trump wins the US Presidential elections.

What happens to the Indian markets if Clinton wins: A Clinton win would be a huge sigh of relief for the markets, albeit with a big caveat. The markets will not celebrate too long before realising that it’s in for 4 more years of Obama.

Clinton’s ties to India will be in tandem with Obama’s ties; that is, the US will say and do all the right things to forge strong ties. Hillary Clinton will be looked at as an extension of the Bill Clinton years and an extension of the Obama years. In other words, diplomacy between the countries will be fluid. The major appeal of Trump amongst his voters is that he wants to eliminate excess “political correctness”.

But political correctness if how the Clintons operate. You simply do not remain politically influential for three decades without saying and doing the right things to keep things moving.

Did India benefit from Obama’s Presidency? Absolutely. From an objective point of view, many deliverables were met. It may have taken more than a decade to get here, but the civil nuclear agreement is set to begin paying dividends for U.S. nuclear suppliers. For India, the benefits have been long known: the agreement legitimately cleared a path for India’s normalisation as a nuclear weapons state outside the Nuclear Nonproliferation Treaty.

Other tangible benefits are that bilateral trade between Indian and the USA has increased annually, although the US needs to step up its efforts to meet the stated goal of $500 billion by 2020. Obama’s administration has lauded India’s efforts to roll out the “Smart City” programs across various cities, but the US has not done its part to help India.

The US has said all the right things. Obama has done his part by doing the little things, like releasing Youtube videos on Diwali while speaking in Hindi and showing, perhaps through more words than actions, that the USA loves India.

As of now, India’s economy is mostly moving on its own momentum while keeping warm ties with the US government. With Clinton as the next President, we should expect more of the same.

What happens to the Indian markets if Trump wins: It’s impossible to tell.

On one hand, Trump has made outlandish remarks such as his insistence of banning Muslims into America. On the other hand, he probably understands business better than most politicians. Some of the things he says about the undervalued Yuan that China deploys are factually correct.

On the topic of China, Trump has not backed down his rhetoric. India could benefit massively with a Trump presidency. After all, there are growing security concerns now that it’s clear China and Pakistan are forging close ties. China provides more than 60 percent of Pakistan’s armament.

Security is a major issue for both India and the USA. Through that alone, it’s safe to say that Trump would probably ease tensions between India and its neighbors more than Clinton.

And through that forged relationship, business ties might open in more ways between India and the USA than ever before and the markets might rejoice over the idea that India is a legitimate trusted ally of the USA.

Or the markets might plummet over the disbelief that Donald J Trump is the President of the United States of America. We will find out soon.

The author is director, Upstox, an online low-cost broking firm.

Updated Date: Nov 08, 2016 11:56:14 IST