US midterm elections on Tuesday, November 3, could change control of Congress amid uncertainty for India’s stock markets. Emkay Research assigns a 60% probability to Democrats winning both chambers and 30% to a divided Congress. Yet the brokerage expects US tariffs to change little in either case. Instead, renewed conflict involving Iran and rising oil prices remain major risks for Dalal Street.
The Sensex and Nifty have fallen by as much as 12% in 2026 amid shifting US tariff policies, higher bond yields and foreign institutional investor outflows. Rising energy costs have added pressure as investors assess the possible election outcomes.
Republicans enter the vote with a narrow advantage in the House of Representatives and control of the Senate. Democrats need additional seats in both chambers to reverse that position. President Donald Trump will remain in office regardless of the results.
Midterm elections take place halfway through a presidential term and determine the makeup of Congress. The House and Senate pass federal laws and oversee government activity. Voters also use the elections to assess the president’s performance, although turnout usually trails presidential contests.
A Democratic House majority would gain committee leadership and the power to investigate the administration. Control of both chambers would extend the party’s influence over federal spending, legislation, and appointments. What would either result mean for India's financial markets?
Emkay Research expects the main effects to come through foreign policy rather than an immediate change in market rules. It cites tariffs, immigration and possible renewed fighting with Iran. Higher crude prices could then affect India’s external payments, currency, and equities.
Emkay Research puts the probability of Democrats taking the House and Senate at 60%. The brokerage links its forecast to Trump's low approval ratings, high fuel prices and public dissatisfaction with tariffs. Such a result would end unified Republican control of Washington.
Democratic lawmakers could increase investigations into tariff decisions, but Emkay expects most existing trade measures to remain. Trump would still retain broad executive authority over parts of trade policy. As a result, greater congressional scrutiny would not necessarily reverse current tariffs.
Immigration policy could face tougher funding negotiations. Emkay expects restrictions on Immigration and Customs Enforcement budgets and more scrutiny of enforcement practices. Lawmakers might also seek to reduce obstacles facing skilled migrants.
Foreign policy presents a different challenge. Although Congress could examine decisions and use spending powers, the president would keep substantial room to act. Emkay therefore warns that renewed escalation in Iran could drive oil prices higher, with consequences for India.
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Emkay assigns a 30% probability to Democrats winning the House while Republicans keep the Senate. Under that arrangement, House committees could investigate administration policies and challenge immigration funding. The brokerage nevertheless expects limited changes to US tariffs.
A divided legislature could also intensify budget disputes. ICICI Global Markets says disagreement over spending priorities could raise the likelihood of a government shutdown. It notes that shutdowns can reduce economic growth during the affected quarter, depending on their duration.
Meanwhile, oversight of foreign policy would increase without removing Trump's broad authority. Emkay says the prospect of further Iran conflict and higher oil prices would remain. Those risks would compound existing pressures on India's stock market.
The third outcome is continued Republican control of both chambers. That would preserve the current balance between the presidency and Congress, rather than produce the Democratic oversight envisioned in the other scenarios.
ICICI Global Markets also doubts that a Democratic sweep would change the Middle East conflict's course. It points to earlier unsuccessful congressional efforts to stop the war, leaving oil markets and Indian investors exposed to geopolitical developments.
Emkay Research expects the US midterms to increase scrutiny of Trump's policies without necessarily changing tariffs. Its leading outcomes leave India exposed to oil shocks linked to Iran. ICICI Global Markets also warns that divided control could bring US budget disputes and shutdown risks. The congressional result will determine the extent of oversight.