Stock markets globally are closely watching the ongoing US Presidential elections especially at a time when it appears that it is going to be a close fight between Republican candidate Donald Trump and Democrat Kamala Harris.
For Trump, if he wins, this would be his second innings at the Oval Office, having occupied the White House between 2017 and 2021, before making way for Joe Biden. It was a surprise victory for Trump as experts globally were expecting his opponent Hillary Clinton to win.
Stock markets globally, including India, do not like uncertainties and surprises and hence the Trump's win led to heightened volatility across markets. In India, the benchmark 30-share Sensex plunged more than 500 points the day after Trump’s victory. Investors were apprehensive about Trump's “America First” rhetoric, which suggested potential protectionism, tariff wars, and unpredictable foreign policy shifts.
Here are some of the sectors of the Indian stock market that were in the limelight following Trump’s victory. A deep dive into the factors causing headwinds or tailwinds can help investors make better informed decisions now.
Information Technology (IT)
Trump’s rhetoric on bringing jobs back to America raised concerns among Indian IT companies that rely heavily on outsourcing contracts from US corporations. In early 2017, the Indian rupee weakened against the dollar, reflecting market anxiety over potential tighter immigration policies. However, the sector soon found a positive aspect.
Trump’s push for American companies to invest in domestic manufacturing and infrastructure opened up new opportunities for Indian IT firms to provide cost-effective solutions in data analytics, automation, cloud computing, and AI. Indian IT companies such as TCS, Infosys, and Wipro rose as they were seen as key players in driving tech transformation globally, including in the US through services like automation, cloud computing, and artificial intelligence.
Energy and Defence
Energy and defence were also key sectors that benefited from Trump’s presidency. Trump’s policy of increasing defence spending in the US translated into rising opportunities for Indian companies involved in defence manufacturing, including Hindustan Aeronautics and Bharat Electronics. The US’ shift towards greater defence collaboration with India under the “Indo-Pacific” strategy saw increased defence deals, including the purchase of military hardware from India.
Defence stocks such as Hindustan Aeronautics (HAL), Bharat Electronics, and Larsen & Toubro (which has a defence segment) gained traction during this period, as the US and India signed several defence agreements, including the Communications Compatibility and Security Agreement (COMCASA) and Basic Exchange and Cooperation Agreement (BECA).
Banking and Financial Services
The Indian banking and financial services sector saw positive momentum post-January 2017. The government's demonetisation move in late 2016 had already shaken up the sector, and by the time Trump took office, his stance on tax cuts, regulatory rollbacks, and his push for economic growth through infrastructure development indirectly benefited Indian banks and financial institutions. Additionally, the Indian government's initiatives on financial inclusion, as well as its push for digitisation of the economy, created a favourable environment for financial companies. This led to significant increase in the stock prices of banks like HDFC Bank, ICICI Bank, and Axis Bank during the first few months of 2017.
Automobile
The Indian automobile sector also showed growth after Trump’s victory, particularly in the export market. US trade policies, which initially caused concern, turned out to be beneficial for Indian carmakers due to the ongoing demand for affordable cars in the US. Companies like Maruti Suzuki, Mahindra & Mahindra, and Tata Motors saw positive movement in their stock prices. The continued shift towards electric vehicles (EVs) and an emphasis on fuel efficiency aligned with both India’s and the US’ longer-term policy direction, which contributed to optimism in this sector.
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