Here's what Trump's victory means for Indian markets
Nov 6, 2024, 11:58 IST
With the vote counting for the US presidential elections currently underway, early trends see Trump taking the lead with 247 electoral votes, while Harris follows with 214 votes. With 270 seats needed to win the presidential race, it is hard to declare either Harris or Trump a clear winner right away.
But what would it mean for Indian markets if Trump came to power? Some experts note that Trump's win might come across as a big win for India in terms of stemming the ongoing, rampant FII (foreign institutional investors) exodus, since Chinese stocks may face the wrath of Trump's poll promise of imposing a massive 60% tariff on imported goods from China and at least a 10% levy on all other imports.
This may directly impact export-centric Indian sectors like information technologies, pharmaceuticals, and textiles. While Indian generic drug exports to the US may be subject to higher tariffs, India's IT exports may also be adversely affected.
Notably, Trump's economic policies will be a marked departure from existing ones, which were to get some semblance of continuity under Harris' regime. Per a report from ICICI Securities, "a Trump sweep may push interest rates higher. The Republican method could set in motion higher tariffs and tax cuts—usher in fiscal deficit pressure and become a vehicle for inflationary tendencies.".
A tighter interest rate regime under Trump could also push the RBI on the back foot in terms of reducing interest rates in India. ICICI Bank estimates that with Trump's victory, the US 10-year yields could touch 4.4%-4.5%.
Nomura believes that India stands to benefit if Trump is elected to power since India is largely driven by domestic demand. "Lower commodity prices owing to the hit to China's growth and lower oil prices, due to a greater push towards fossil fuels, will be beneficial for India," the firm adds.
A Trump win could also lead to the rise of the UST 10Y yields, which would, most likely, have a butterfly effect, resulting in the rise of the Indian 10Y benchmark yield to above 6.90%.
Markets start the day in greens
Amidst anticipation of results, benchmark indices Nifty and Sensex opened the day in greens. While Nifty inched up over the 24,000 mark to trade at 24,363.25 points, while Sensex was trading at 80,001.74 points. Sectoral indices such as IT and realty inched up over 3% and 2%, respectively, during today's trade. On the other hand, India VIX dipped by over 6%.
Justin Khoo, Senior Market Analyst, APAC, explains that Trump’s focus is on tariffs, while Harris emphasizes industrial policy; however, Congress will primarily shape future policy direction. Turning to India’s equity market outlook, the Nifty 50 index has surged over 200% since March 2020. "However, recent volatility, weak Q1 earnings, and economic slowdown due to weather disruptions have tempered optimism. Strong domestic investor participation supports market liquidity, although foreign inflows have decreased due to election uncertainties," he added.
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But what would it mean for Indian markets if Trump came to power? Some experts note that Trump's win might come across as a big win for India in terms of stemming the ongoing, rampant FII (foreign institutional investors) exodus, since Chinese stocks may face the wrath of Trump's poll promise of imposing a massive 60% tariff on imported goods from China and at least a 10% levy on all other imports.
This may directly impact export-centric Indian sectors like information technologies, pharmaceuticals, and textiles. While Indian generic drug exports to the US may be subject to higher tariffs, India's IT exports may also be adversely affected.
Unsustained momentum expected
Also, while a Trump win may trigger a short-lived rally in Indian markets, sustaining the same would be difficult, largely due to weak corporate earnings and rich valuations currently plaguing the Indian markets. However, gold prices may also increase, increasing its demand as a haven.Notably, Trump's economic policies will be a marked departure from existing ones, which were to get some semblance of continuity under Harris' regime. Per a report from ICICI Securities, "a Trump sweep may push interest rates higher. The Republican method could set in motion higher tariffs and tax cuts—usher in fiscal deficit pressure and become a vehicle for inflationary tendencies.".
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Nomura believes that India stands to benefit if Trump is elected to power since India is largely driven by domestic demand. "Lower commodity prices owing to the hit to China's growth and lower oil prices, due to a greater push towards fossil fuels, will be beneficial for India," the firm adds.
A Trump win could also lead to the rise of the UST 10Y yields, which would, most likely, have a butterfly effect, resulting in the rise of the Indian 10Y benchmark yield to above 6.90%.
Markets start the day in greens
Amidst anticipation of results, benchmark indices Nifty and Sensex opened the day in greens. While Nifty inched up over the 24,000 mark to trade at 24,363.25 points, while Sensex was trading at 80,001.74 points. Sectoral indices such as IT and realty inched up over 3% and 2%, respectively, during today's trade. On the other hand, India VIX dipped by over 6%.Justin Khoo, Senior Market Analyst, APAC, explains that Trump’s focus is on tariffs, while Harris emphasizes industrial policy; however, Congress will primarily shape future policy direction. Turning to India’s equity market outlook, the Nifty 50 index has surged over 200% since March 2020. "However, recent volatility, weak Q1 earnings, and economic slowdown due to weather disruptions have tempered optimism. Strong domestic investor participation supports market liquidity, although foreign inflows have decreased due to election uncertainties," he added.
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