Analysts say oil and dollar, not US midterms, will steer Sensex and Nifty

The Republican Party currently controls both houses of Congress, yet surveys taken before the vote show President Trump’s support eroding among groups that backed him in 2024, raising the odds of a split legislature once ballots are counted. A Congress divided between the two parties has historically meant sharper short-term market swings, even though long-run annualised equity returns tend to hold steady, since gridlock and political friction typically produce temporary turbulence rather than permanent damage.

Indian stocks have already had a rough 2026, with the Sensex and Nifty each off roughly 12% this year as tariff uncertainty out of Washington, climbing crude prices, elevated US bond yields and ten consecutive weeks of foreign institutional selling have weighed on sentiment. Overseas investors have pulled out upwards of Rs 3 lakh crore so far this year, nearly double what they withdrew across all of 2025.

Angel One’s senior fundamental analyst, Vaqarjaved Khan, argued that markets are rattled by ambiguity rather than by elections per se, and that with crude, bond yields and persistent foreign selling already pressuring sentiment, the midterms amount to just another news item rather than a decisive catalyst. He anticipates volatile, news-sensitive sessions in the lead-up to and immediately after the vote, with the Nifty likely to hover near the 22,400-22,500 band, and flagged oil prices and developments around Iran as the factors more likely to move markets.

Anand Rathi Shares & Stock Brokers’ Tanvi Kanchan said investors have broadly already absorbed the likely result, with wagering platforms pricing in roughly a 90% probability of a Democratic House while the Senate outcome stays uncertain. In her view, a split Congress could actually lower the odds of sweeping changes to fiscal policy or trade tariffs, leaving the dollar and American interest rates as the primary routes through which the election could ripple into Indian markets. She added that the Federal Reserve’s messaging, oil’s trajectory, and whether the foreign-selling streak finally breaks will carry more weight than the election tally itself, noting that a softening US economy nudging the Fed toward pausing rate moves could take some of the pressure US yields have placed on Indian stocks.

Why it matters for markets: A split US legislature would likely cap the scope for major fiscal or trade overhauls, though short-term jitters tied to the midterm vote could still spill into global sentiment. For Indian equities, the dollar, Treasury yields, crude prices and foreign capital flows remain the channels that matter most, outweighing the election result in significance.

Source: Economic Times Markets