Trump and Biden in for a long counting night; analysts advise investors play it safe

Sensex and Nifty are trading with gains today as the United States tries to ascertain who will be the next President. However, experts have been advising investors to stay cautious as they expect volatility to inch higher during the day and possibly in the coming sessions. “If there is a situation where one party takes the house and the presidency goes to the other side, that could be negative for stock markets,” Vishal Wagh, Head of Research, Bonanza Portfolio told Financial Express Online. Trends so far suggest nail biting finish with many key states still too close to call.

The presidential race will also keep eyeballs glued on the aftermath, which is the stimulus package. “There is also a strong chance that Democrats have a majority in the Senate, which implies higher fiscal spending. In terms of connotation for the markets, we should brace for a transient sell-off in US equities and fall in US dollar, Ergo, Gold could rally higher, helped by a tumbling US dollar and concerns of higher fiscal spending and potentially rising inflation,” said Hitesh Jain, Lead Analyst – Institutional Equities, Yes Securities.

Jain added that a win for Joe Biden would see base metal prices move higher as the US-Chinese relationship will stabilize and markets start pricing in a probable trade deal. “On the contrary, If Trump reclaims Presidency and Republicans maintain majority in the US Senate, we could have an ensuing stock market rally and stronger US dollar, as investors will be pleased with the fact that US corporate taxes will remain low,” he said.

“If 11650 breaks only then investors should go short and on the upper side 12,050 should be broken for taking long positions,” said Vishal Wagh while adding that it is time for investors to play safe and maintain good hedge positions as overnight market swings can not be ruled out. “Risk should only be taken according to one’s appetite,” he added. With mail-in ballots and early vote-ins, the counting process for this US President Election is expected to be tiresome with some even saying that clarity will emerge only in a few days.

“Global Market may be volatile post election results in the US. However directionally it may not be very bullish from current levels in the next six months. Lot of good news is already factored in at the current level of the market,” said Amit Jain, Chief Strategist – Global Asset Class, Ashika Group.

Nikhil Kamath, Co-Founder and CIO, True Beacon and Zerodha told Financial Express Online that trying to secure fresh directional positions, in the short term or/and long term can be very difficult for the investors with moderate risk appetite. “Investors who are worried about capital deterioration of their value investments or long-term investments can use vanilla hedges to reduce the impact of any possible drawdowns in exchange of any possible gains as well in the short-term period till the chaos settles around the elections,” he added.