MUMBAI: A feel-good rally on the back of Donald Trump winning the US presidential election helped the sensex close above the 80K mark again on Tuesday with the index up 902 points or 1.1% at 80,378 points. Software and metal stocks led the rally that was backed by domestic funds although foreign portfolio investors (FPIs) remained big sellers.
Historically, stock markets globally have given superior returns during Republican administration and hence the euphoria, market players said. In mid-session on Tuesday, the Dow Jones and S&, the two leading indices in the US, had both scaled new life-high levels. At 11pm IST, Dow Jones was up over 1,350 points (3.2%) while S& was up about 120 points (2.1%). Nasdaq Composite, Russell 2000 and most other indices were also up substantially. Across the world, Nikkei in Japan closed 2.6% up while FTSE in UK closed flat but DAX in Germany was down 1.1% and Hang Seng in Hong Kong declined 2.2%.
In the domestic market, at close, Nifty on the NSE was up 271 points at 24,484 points. According to Prashanth Tapse of Mehta Equities, the feel-good factor of Trump’s win in the US election had a rub-off effect on world equity markets, including local indices as domestic investors resorted to value buying, especially in IT stocks. “The market is hoping that the new regime will not hurt the H-1B visa rules, leading to a rally in the recently beaten-down IT stocks. However, investors remain skeptical about the recovery, as there has been no let up in FII selling in the domestic equity market,” Tapse said. On Tuesday, FPIs were net sellers at Rs 4,456 crore, taking the total number to above Rs 1.1 lakh crore since Oct. On the other hand, domestic funds were net buyers at Rs 4,889 crore on Tuesday, BSE data showed.
The day’s rally added about Rs 7.7 lakh crore to investors’ wealth with BSE’s market capitalisation now at Rs 460.3 lakh crore, official data showed. For Thursday, some pointers are towards flat opening with a negative bias. The GIFT Nifty that trades on IFSC in Gujarat, was down 0.5% in late evening trades.
Wall Street’s fear gauge dropped sharply, after Trump cruised to a clear White House victory. It isn’t uncommon for the Cboe Volatility Index, or VIX, to drop after presidential elections, reports WSJ. But Wednesday’s move also likely reflects relief that election uncertainty won’t drag on for days or weeks. With polls so close heading into Tuesday, some investors had worried that a definitive victor might not have emerged on election night. The VIX recently traded around 15.9, down from an intraday high of 23.4 last week. That put the index on pace for its lowest close since late Sept.
The Trump Trade, which describes the shift in market behaviour and investor actions in response to the economic policies and political moves associated with a potential Trump presidency, was in focus. This concept was coined after his election in Nov 2016, as markets reacted to his pledges for deregulation, tax cuts and boosted infrastructure spending. Essentially, the Trump Trade reflects the expectation of a pro-business climate.
At the same time, shares in renewable energy firms in US plunged after Trump won on a platform that promises to boost fossil fuels and undo the green agenda of his predecessor.US clean energy stocks suffered in pre-market trading in New York, especially solar firms. Sunnova Energy International Inc. was down more than 23%, while First Solar Inc. and green hydrogen equipment maker Plug Power Inc. each fell around 14%.
“Trump back in the White House is not what any clean energy company in the US would want,” said Pavel Molchanov, an analyst at Raymond James, reports Bloomberg. The president-elect has vowed to take aim at US offshore wind efforts as one of his first measures after taking office. While campaigning, he also promised to lift restrictions on domestic fossil-fuel production, and said he plans a wide array of tariffs on imported goods. That could drive up inflation and eventually lead the Federal Reserve to raise interest rates, making renewable investments more expensive.At the same time, while Molchanov expects that higher tariffs on imported solar panels would hurt US companies in the sector, he doesn’t see Trump or the Republicans getting rid of clean energy tax and investment credits since they are widely appreciated.