Indian stock markets rallied as Donald Trump secured his path to become the 47th US President. The market movement shows a clear shift in investor sentiment.
While protectionist trade policies could impact Indian exports, Trump’s strategy to reduce US dependence on China may create new opportunities for Indian manufacturers and tech firms as alternative suppliers.
The US-India relationship may see developments in line with Trump’s foreign policy. As Garg pointed out, “A continuation of his first-term approach, including strengthening US-India ties through initiatives like the Quad, would enhance security cooperation, benefiting India.”
Trump’s focus on revitalising US manufacturing could encourage global companies to set up production in India. Sectors like manufacturing, energy, and defense stand to benefit, presenting new opportunities for investors.
Should Trump reimplement high tariffs on Chinese products, Indian manufacturers could gain a competitive edge in US markets, boosting export-oriented industries such as auto parts, solar equipment, and chemicals. This could have a positive impact on mutual funds that invest in these sectors, making them attractive options for investors aiming to leverage India’s expanding export potential.
A Trump-led administration could also see lower energy costs due to pro-fossil fuel policies, benefiting Indian oil and gas companies. For Indian IT sector, improved BFSI spending in the US is positive for Indian players. In addition, Trump’s proposal to reduce the corporate tax rate for domestic production from 21% to 15% could support IT services demand by alleviating budgetary constraints for US firms, benefiting companies like TCS and HCL Technologies.
However, Trump’s reduced emphasis on climate action may lessen US support for India’s renewable energy sector but, his pro-business stance could encourage investment in strategic technologies like 5G, benefiting Indian telecom giants such as Reliance Industries and Bharti Airtel.
On a contradictory note, Indian stock market could face volatility due to Donald Trump's "protectionist trade policies and more restrictive immigration plans". It may pose challenges for India’s IT sector, which relies heavily on US H-1B visas to deploy talent onshore. If Trump further limits these visas, Indian IT firms may potentially experience headwinds like increased costs and operational challenges, affecting their US growth prospects.
Experts highlighted that commodity prices rose because of Trump's protectionist trade polices and this could make foreign institutional investors cautious and limit investments in emerging economies like India.
Overall, Trump's policies may create headwinds for sectors like IT and Pharma in the near-term but may be beneficial in the longer term, as a stronger dollar will result in better revenues for Indian firms,.
