The outcome of the November 2026 US midterm elections could have significant geopolitical and market implications for India, although the impact on domestic equities may be felt more through movements in crude oil prices, the dollar and US bond yields than through a direct shift in US policy towards New Delhi.
Emkay Global Financial Services expects familiar trade and immigration-related frictions between India and the US to persist even if Democrats gain control of Congress. While a Democratic majority could increase scrutiny of President Donald Trump's tariff and immigration policies, it is unlikely to substantially limit his executive powers. For Indian markets, the bigger concern is the possibility of a renewed escalation in the Iran conflict after the elections, which could push crude oil prices higher, worsen India's balance of payments (BoP) position and put pressure on the rupee and equities.
The brokerage believes that a decline in the dollar, US Treasury yields and crude oil prices would be supportive of Indian equities. However, it cautions that the geopolitical backdrop could turn less favourable, with a possible escalation in the Iran conflict threatening to trigger another spike in oil prices.
Against this backdrop, the US midterm elections will be closely watched by global investors. Historical data suggests that US equities have tended to perform well in the months following midterm elections, particularly when the result produces political gridlock. However, Emkay believes the current market environment is less favourable than in previous cycles, raising questions about whether the S&P 500 can repeat its historical post-election gains.
According to Emkay Global Financial Services, the implications of a potential Democratic victory are likely to be more geopolitical than directly market-related for India.