• The upcoming U.S. presidential election is causing fluctuations in the Indian stock market.
• A Trump win could lead to lower corporate tax rates in the U.S., benefiting several equity sectors in India, while a Harris victory is seen as a sign of policy continuity.
• In the UK, Kemi Badenoch's victory in the Conservative party leadership race and Elon Musk's pledge to Trump's campaign are influencing the market.
• The U.S. election has significant implications for global markets, with investors adjusting their strategies based on potential outcomes.

As the U.S. presidential elections draw near, the Indian stock market is showing signs of caution. The NSE Nifty 50 and BSE Sensex, two of India's benchmark indexes, fell about 1.25% each on Monday, marking their biggest single-day loss since October 3. This comes as the U.S. presidential race between Democrat Kamala Harris and Republican Donald Trump remains virtually tied in opinion polls.

The uncertainty over the U.S. presidential elections has served as a key catalyst for the ongoing correction in the Indian markets, according to Vinit Bolinjkar, head of research at Ventura Securities.

The potential outcomes of the U.S. election could have different impacts on the Indian market. A Trump win could lead to lower corporate tax rates in the U.S., which is expected to boost spending and in turn benefit several equity sectors in India. On the other hand, a Harris victory is seen as a sign of policy continuity, a neutral-to-mildly-positive outcome for Indian stocks, according to three analysts.

However, the Indian markets have been weighed down by lacklustre earnings and sustained foreign selling over the last five weeks. The benchmark Nifty 50 has dropped 8.7% from the record high levels hit on September 27. Foreign institutional investors net sold Indian shares for the 26th consecutive session on Monday, with outflows amounting to 43.30 billion rupees ($515 million).

UK Politics and Tesla's Influence

In the UK, Kemi Badenoch, the first black woman to be elected leader of the Conservatives, has won the party leadership race with 56.5% of the vote against Robert Jenrick's 43.5%. Despite her victory, Badenoch faces a challenging task to unify the party and ignite the grassroots, as thousands of members were reportedly dissatisfied with the final choice of candidates.

Meanwhile, Tesla CEO Elon Musk, who has pledged over $130 million toward Donald Trump's 2024 presidential campaign, recently stated that a Trump victory could lead to temporary hardship for Americans. Musk proposes deep budget cuts to reduce federal spending by trillions, a move that has sparked broad public debate ahead of the 2024 election.

In the stock market, sales have been up for the half year ending Sep-24, with a YoY increase of 55% from INR 127 Cr in Sep-23 to INR 197 Cr in Sep-24. Similarly, Net Profit was up 66% from INR 10.8 Cr to INR 17.9 Cr. However, the broader, more domestically focused small- and mid-caps traded flat.

Election Impact on Housing and Business Sectors

In the housing sector, average U.S. home prices are up 50% since 2020, while wages have risen just 23%, putting home purchases out of reach for many. Kamala Harris has proposed a $25,000 down payment assistance for 4 million first-time homebuyers over the course of four years.

In the business sector, billionaire hedge fund manager John Paulson has threatened to remove his money from the U.S. markets if Vice President Kamala Harris defeats former President Donald Trump in November's presidential election. Paulson cited the policies Harris' campaign laid out that would focus on more centralized price controls and new government spending programs.