US Government Shutdown: Will it likely have an influence on the Indian stock market?

The Indian stock market opened with an upward gap and continued to extend its early morning gains amid rumours of a partial US shutdown on October 1st, 2023.

Read more :India’s budget deficit reached 36% of the full-year target

It did, however, experience a significant drop in the final hour of the Friday session, but it was insufficient to keep Indian indices rising.

However, stock market specialists believe that in the event of a US government shutdown, particularly in light of the Republican Party's most recent stance, US stocks may experience some selling pressure for a relatively brief period of time.

Though action on the Indian stock market would be absent owing to Mahatama Gandhi Jayanti happening on October 2, 2023, this may have an effect on other global exchanges. Market analysts argued that while the Indian stock market would temporarily respond to changes in the US stock market, it is anticipated to be unaffected by the US shut down.

How this potential shutdown in US could impact India’s stock market?

Arun Kejriwal elaborated on the impact of the US shutdown on Dalal Street, stating that the most significant effect would occur on Monday, October 2, 2023, the second day of the shutdown. In India, the stock market is actually closed this Monday, on the occasion of Mahatma Gandhi's birth anniversary.

So, when the Indian stock market opens again on Tuesday, we will know how the US government shutdown has affected other global stock exchanges. Therefore, the US shutdown won't have a significant effect on Indian indicators.

Kejriwal argued, however, that any significant decline should not be viewed as a buying opportunity because it might be the result of ongoing FII sell-offs.

According to Rajesh Sinha, events like the US shutdown have an impact on foreign investment by FIIs and FPIs into the Indian market, which is a crucial component for Indian stock markets.

How it would affect Americans?

The US shutdown won't likely have a significant negative influence on the US stock market, according to Rajesh Sinha of Bonanza Portfolio, but there will undoubtedly be some effects.

Average performance of the benchmark S&P 500 index during shutdowns has been unchanged. The S&P 500 increased by more than 10% during the latest government shutdown of 2019 .It has been noted that market recovery has always been swift and harm has always been contained.

Rajesh Sinha, Senior Research Analyst at Bonanza Portfolio highlighted the effects of a US government shutdown by stating that there will be a shutdown of the federal government if US lawmakers are unable to approve legislation funding it before the end of the fiscal year on September 30, 2023.

Millions of federal workers would be placed on leave, the military would not receive pay, air transport would be disrupted, and crucial safety net programmes would be cut off. A shutdown would also be politically damaging to the US Congress, whose job it is to raise money for the government.

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