As President-elect Donald Trump prepares to return to the White House next week, the Street is bracing for the impact of his policies. His plans are expected to boost growth in the US, but there are growing concerns about the inflationary pressures that may follow, potentially sending ripples through global markets.
The effects of Trump’s anticipated policies are already being felt, particularly in emerging markets. Investors are pulling out of emerging market stocks, spooked by the prospect of Trump's trade tariffs and the strengthening US dollar.
This shift has led to a sharp decline in MSCI’s emerging markets index, which tracks nearly $7.6 trillion in stocks across markets like China, India, Brazil, and South Africa. Since hitting a two-and-a-half-year high in October, the index has fallen more than 10 percent, while developed market stocks have remained relatively flat in comparison.
Emerging markets are particularly vulnerable to a combination of factors. Analysts expect Trump’s inflationary policies—such as tariffs and tax cuts—along with an already strong US economy, will push the Federal Reserve to maintain elevated interest rates for a longer period than previously anticipated. This scenario has rattled investors, especially as they weigh the prospect of the Fed tightening monetary policy in response to rising inflationary pressures in the US.
With tariffs set to escalate, the US dollar continuing to rise, and the Federal Reserve on track to take a more cautious approach to rate cuts, it seems we’re heading toward a potential showdown between Trump’s policies and the Fed in the next few months.
BSE (Rs 5,781, +6%)
Nuvama Institutional Equities initiated coverage with a buy call
Bull Case: Despite the tighter index derivates regulations, the BSE is highly adaptive and shall thrive, noted the brokerage. The weekly contracts that were discontinued made up only 21.3 percent of its index option premium volumes, compared to NSE's 46.9 percent. Moreover, BSE has room to expand its derivatives active customer base, which is currently 1.5 million–2 million (monthly) versus NSE’s 4.2 million.
Bear Case: Key risks for the company include any adverse regulatory changes, overdependence on equity index options segment, any large-scale macroeconomic slowdown along with any technology infrastructure or security risks.
Axis Bank (Rs 1,027, -2%)
Shares slipped the most in 14 months after 44 lakh shares changed hands.
Bull Case: The bank anticipates an increase in loan growth in the upcoming quarters but plans to carefully manage how this growth is distributed across different types of loans, particularly in the retail segment. By doing so, they aim to ensure that the loan portfolio delivers the highest possible returns, balancing growth with profitability and risk management.
Bear Case: For Q3, Emkay Global analysts suggest that Axis Bank’s gross non-performing asset (GNPA) ratio could rise to 1.5 percent, up from 1.4 percent recorded in the second quarter, primarily due to stress in the microfinance institution (MFI) and unsecured loan portfolios.
(with inputs from Zoya and Veer)
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
