India stands to potentially benefit from this situation, with improved prospects for Foreign Portfolio Investment.
US election results
: Republican candidate Donald Trump is projected to defeat Democrat candidate Kamala Harris in the US presidential elections, as per the latest counting trends. Indian equity markets have responded positively to Trump’s potential win. But what will the long-term impact of Trump at the White House be for Indian stock markets?
A Republican sweep might trigger a short-term upswing in stock markets, primarily due to gains in US equity markets, as per Emkay Global’s analysis.
The Chinese markets, however, are expected to face heightened volatility and uncertainty during this period.
India appears to be among the primary beneficiaries of Trump’s presidency, particularly concerning economic and foreign policy matters. As Nomura’s Sonal Verma states, “We see India as a relative beneficiary, due to its domestic demand-driven growth model and benefits from lower commodity prices, supply chain shifts and on foreign policy.”
The advantages India stands to gain from the current supply chain reorganisation, as companies reduce their dependence on China during Trump’s administration, are likely to outweigh any potential challenges related to trade and immigration policies, according to Verma.
According to an ET analysis, India stands to potentially benefit from this situation, with improved prospects for Foreign Portfolio Investment positioning and increased capital flows, according to the brokerage firm’s assessment. Here is a list of potential advantages and disadvantages of a Trump presidency for Indian stock markets:
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Benefits of Trump’s Potential Victory for India
- Indian export sectors could gain significant advantages if Trump wins, as higher tariffs on Chinese products may enhance competitiveness of Indian manufacturers in areas like auto parts, solar equipment, and chemical production in US markets.
- Energy costs might decrease due to Trump’s fossil fuel policies and expected slower Chinese economic growth. This could positively impact Indian oil companies like HPCL, BPCL, IOC, and gas distribution firms such as IGL and MGL.
- Manufacturing and defense sectors could experience growth as Trump’s emphasis on US industrial development may benefit companies operating in both countries, including ABB, Siemens, Cummins, Honeywell, GE T&D, and Hitachi Energy.
- Resolution of international tensions under Trump could improve supply chain efficiency, aiding Indian businesses. His focus on strengthening US manufacturing and military capabilities could provide opportunities for Indian defense companies like Bharat Dynamics and HAL.
- The business climate could improve with Trump’s leadership, potentially benefiting Indian equity markets through reduced corporate taxation, fewer regulatory requirements, and business-friendly policies.
Also Read | US elections impact on H-1B visas: Trump or Harris – who as US President is better for H-1B visa holders?
Disadvantages for India due to Trump’s Return:
- A Trump presidency could trigger inflation, affecting Indian businesses through higher interest rates and increased costs for US-sourced materials and equipment. Economic experts anticipate that his proposed policies on tariffs, deportation, and deficit spending could cause inflationary pressures, resulting in immediate price increases and wage adjustments.
- Trump’s economic policies could strengthen the US dollar and increase bond yields through tax reductions and fiscal measures. This would attract global capital to the US, potentially weakening emerging market currencies including the Indian rupee. A stronger dollar would increase India’s import expenses, particularly for oil, leading to higher domestic inflation.
- Despite possible initial market gains, Trump’s policy uncertainties could create extended market instability. Previous data shows US markets outperformed Indian markets during his first term, with Nasdaq gaining 77% compared to Nifty’s 38%.
- Previous restrictions on H-1B visas under Trump affected Indian IT companies through increased rejection rates and costs. However, these companies have adapted by increasing local US hiring and green card holders, reducing their vulnerability to future immigration restrictions.
- Trump has criticized India’s trade policies and suggested reciprocal tariffs. His administration could pressure India to reduce trade barriers, affecting sectors like IT, pharmaceuticals, and textiles. However, his efforts to reduce Chinese manufacturing dependence could benefit India.
- The anticipated increase in the US fiscal deficit under Trump could lead to global inflation and higher interest rates, creating challenges for emerging markets’ monetary policies. While India’s domestic-focused economy provides some buffer, a Harris victory would likely maintain current economic frameworks with minimal disruption.
