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US election results impact Indian stocks, influencing market trends, investor sentiment, and overall economic outlook

The Indian stock market as of 12 PM, has continued its positive momentum, with benchmark indices BSE Sensex and Nifty 50 extending their earlier gains. Following a strong opening on Wednesday, trends indicate that global investors are closely monitoring the ongoing US presidential election, with former President Donald Trump currently leading the race to secure another term in office.

Sensex and Nifty Maintain Positive Momentum

The BSE Sensex has surged by over 800 points, crossing a significant milestone, while the Nifty 50 is hovering around 24,450, reflecting an upbeat sentiment across the Indian markets. This rise is largely fuelled by strong domestic stock performances, despite external geopolitical uncertainties. Investors are encouraged by India's resilience and the positive outlook for economic growth.

The US presidential election remains a key factor impacting market movements. While the race remains tight, there are growing expectations of a "Trump trade," as investors anticipate that a Republican victory may ease some policy constraints. However, analysts caution that the situation remains fluid, and it is too early to make definitive predictions regarding the election outcome.

RBI’s Stance on NBFCs and Inflation

In a significant development, Reserve Bank of India (RBI) Governor Shaktikanta Das addressed the actions taken against non-banking financial companies (NBFCs). The RBI recently issued a “cease and desist” directive to certain NBFCs, prompting concerns among market participants. However, Governor Das emphasized that these actions were part of the RBI's corrective measures, not punitive actions. This clarification helped alleviate fears about the stability of the NBFC sector in India.

Governor Das also addressed inflation concerns, noting that September inflation stood at 5.5%. While October inflation is expected to surpass this level, the RBI remains vigilant and prepared to take measures to curb inflationary pressures, ensuring the stability of the Indian economy.

Global Market Impact of US Election

The ongoing US presidential election is significantly impacting global market sentiment. US stock futures and the dollar have shown positive movements, while Treasury yields have risen, signalling optimism for a potential Trump win. Bitcoin also saw a rise, further indicating market optimism. Despite this, investors are exercising caution, with many awaiting the final election results before making major moves.

While Trump’s policies on tariffs and trade are well understood, it remains unclear how they will evolve, depending on the election outcome. On the other hand, Democratic candidate Kamala Harris emphasizes industrial policy, but the role of Congress in shaping policy remains crucial, regardless of the winner.

US Economic Outlook: Concerns Over Slowdown

Despite optimism in the US stock market, concerns over a potential economic slowdown and weak earnings for Q2 temper investor sentiment. Analysts are currently considering various scenarios for the US economy. A "soft landing" where inflation eases without leading to a recession seems likely, but the “No Landing” scenario, suggesting steady growth and sustained inflation, remains less probable. This would require substantial productivity gains and a robust labour force.

India’s Growth Prospects and Investor Sentiment

JP Morgan projects India’s GDP will grow by 6.5% in 2024, reinforcing the optimistic outlook for the country’s economy. The Nifty 50 is expected to find support at key levels of 24,300 and 23,200, though volatility may persist in the short term. While foreign inflows have slowed due to global uncertainties, the domestic investor base remains strong, ensuring continued market liquidity.

India’s economic resilience positions it for long-term growth, and the stock market could perform well in the medium to long term as the global economy recovers. This outlook is encouraging for investors looking for stability amid the ongoing market volatility.

Commodities: Gold and Bonds Remain Safe Havens

In the commodities market, gold continues to serve as a safe-haven asset, attracting investors amid geopolitical uncertainties and falling interest rates. The ongoing conflicts in Ukraine, the Middle East, and the upcoming US election have driven demand for gold, which benefits from its inverse relationship with the US dollar. Additionally, with the Federal Reserve signalling potential rate cuts, gold’s appeal is expected to continue to rise.

In the bond market, the 30-year Treasury bond auction saw robust demand, highlighting the growing interest in higher-yield bonds as the potential for rate cuts rises.

Corporate Highlights: Cyient DLM and Waaree Renewable Technologies

Among the corporate news, Cyient DLM signed a letter of intent to deliver services to Honeywell Aerospace Technologies for the next several years. This deal is a 16-year team that will concentrate on intensification of the aircraft cooling technology with efficiency and weight reduction.

On the other hand, a smallcap renewable energy firm, Waaree Renewable Technologies witnessed a 5% jump in its share after it reported good results for the second quarter of the FY. The company registered a $249.5 billion year-on-year revenue growth, opening the floodgate of buying interest in the company’s stock.

Conclusion

Indian stock market is also moving ahead on a positive note with the help of domestic factors and investors’ sentiments also remain high despite the uncertain global environment. However, the exposure to the US election is an essential consideration besides strong growth outlooks for India’s economy. There are forecasts that gold and commodities are going to remain intact which has created positive sentiments for those linked to it such as Cyient DLM and Waaree Renewable Technologies had garnered attention for their sound business prospects.