The moves of the Big Daddy have widespread implications on Indian businesses and stock markets alike. Recently, Indian IT stocks took a beating after the US Senate passed a Bill doubling work-visa costs. Similarly, stock prices of power and construction firms received a boost when the Indo-US N-deal was signed. And some of these stocks have already gained on expectations of a positive announcement relating to the nuclear deal during US President Barack Obama?s visit slated for November 6. Also, there are speculations that a number of deals could be signed before Diwali in sectors like retail, insurance and defence.
ICICI Securities? CIO Piyush Garg says, ?Obama?s visit will boost sentiments, as a head of state is coming to India. India is emerging as a strong market amongst most global fund managers. The visit will put a further stamp on it?. However, Equities Ambit Capital CEO Andrew Holland believes it?s difficult to predict whether there will be any positive or negative impact. ?Stocks in the IT sector could benefit if there are any positive announcements. Also, infrastructure, especially power, could benefit,? he says. Interestingly, sectors like banking and insurance, IT, power and infrastructure, which have a significant weightage on Sensex and Nifty, could expect some announcements and affect the overall market sentiment.
So far, five US Presidents?Dwight Eisenhower, Richard Nixon, James Carter, Bill Clinton and George Bush?have visited India. Call it correlation or sheer coincidence, whenever a US President has visited India, the stock market has witnessed sharp swings. When Democrat Bill Clinton, the first US President to set foot in India after over two decades, visited in March 2000, the equity market, as measured by the Sensex, fell about 9% during that month.
In subsequent months, the stock market collapsed further with the bursting of the ?dot com? bubble.
Half a decade later, when Republican Bush visited India in March 2006, the market rose a sharp 9% on the back of heavy foreign investor buying. While data set might be limited, after all only two Presidents have visited India ever since Sensex values became available, what might be interesting to notice is that Republicans have had a more salubrious effect on our stock markets than otherwise.
And this time around, the market may not have a lot of expectations from Obama?s visit; but after gaining about 12% in September, the markets are also hovering around their all-time highs. Any disappointments could also mean a slip back from these levels.
Some players though, are calling the President?s visit a non-event, from a market perspective. ?It is just a passing event,? says Motilal Oswal MD Raamdeo Agrawal. ?What announcement could be made from here which cannot be made in the US?? he questions.
Nandan Chakraborty, MD, Institutional Research, ENAM Securities, says, ?There are far more important factors that will impact the market than the President?s visit?. However, he expects the visit could impact sectors such as IT, insurance and retail.
Whether Obama?s visit has any direct influence on the markets remains to be seen. November, as it is, will be an eventful month ? with the US Federal Reserve deciding on another round of quantitative easing (QE2) and back home the Reserve Bank of India meeting on November 2 to decide on interest rates. Unleashing $1 trillion of liquidity is expected to benefit emerging equity markets including India. ?If there is a lot of quantitative easing there will be gush of liquidity around the world, which will put pressure on the US dollar and lead to significant flows into emerging markets and commodities,? said Uday Kotak, vice-chairman and managing director, Kotak Mahindra Bank, recently in a TV interview. ?If the Fed does less than what most people think there could be a correction in the markets.?