The much-awaited US presidential election results are out, and as most expected, Trump is back in power again! And with that, all the countries around the globe have started evaluating whether Trump 2.0 will be positive or negative for their country. For India, it brings both opportunity and challenges. Given the change, share market advisor in India are now exploring sectors that will benefit from the change and which ones investors should stay away from, at least in the short term. In this article, we lay down the positives and negatives for India with the appointment of Trump as the US President and how Trump’s Re-Election Impacts India.
Trump 2.0: What It Means for India’s Economy and Indian Stock Market
Key Challenges for India
Higher Tariffs on Indian Exports
One of the biggest concerns after Trump started office at the White House is the tariffs. As per Trump 1.0, India levies heavy tariffs on the US companies, and he had been vocal about it during his first tenure. As per experts, the Trump 2.0 could levy heavy taxes on Indian exports, which would take a toll on domestic businesses. He had been said about it during his election campaign. You should note that the US is India’s largest trading partner, with an annual trade of over $190 billion. Since the US is India’s largest trading partner, this could impact key industries, from manufacturing to agriculture.
Threats Over Currency Shifts
India aims to diversify its trade currency away from the US dollar. However, Trump’s policies may penalize countries moving away from the dollar. Such penalties could disrupt India’s trade plans and economic strategies. Some countries are working towards moving away from the US dollar. India is also one of them, and Trump has threatened not to do business with countries that are moving away from the dollar. If the threat becomes a reality, it could impact India’s effort to shift away from the US dollar and deploy more rupees for trade.
Rising Inflation Concerns
The above two factors lead to a high trade barrier. As per Bernstein Research, a high trade barrier could trigger a spike in inflation that can put the rate-cut trajectory off-route, resulting in higher income inequality. With higher inflation, the middle class could be impacted as the prices of essential items will increase.
Opportunities for India
Not all is gloomy for India and businesses with Trump coming to power. Here are some ways India and Indian companies will benefit:
Relief for Oil Importers
It is a well-known fact that Trump loves fossil fuels, and once he takes over the day-to-day activities, it will lead to higher production of US oil and gas, which could ease global oil prices. As we know, India is a net importer of crude oil, and the lower crude oil price will definitely benefit India. Indian consumers and refiners are likely to benefit.
Prospects for the IT Sector
The Indian IT sector will face some challenges and will benefit also. If Trump wins, Indian IT companies may face challenges due to possible changes in US immigration policies, especially regarding H-1B visas. Trump has criticized the H-1B program in the past, calling it “unfair” to American workers and pushing for higher minimum wages for visa holders. Given that the US is a major market for Indian IT firms, any tightening in visa policies could limit their ability to send skilled workers to client sites.
However, a Trump administration might also intensify anti-China trade policies, which could benefit Indian exports. As the US seeks alternatives to Chinese suppliers, India could become a preferred partner, potentially opening more business opportunities for Indian IT firms and other sectors. This shift could help offset some of the challenges posed by stricter visa regulations, allowing Indian companies to expand their footprint in the US.
Possible Growth in Foreign Investment
One of the biggest concerns for the Indian equity market recently is the outflow of Foreign Institutional Investor (FII) funds. With Trump returning to office, we could see a renewed preference for business ties with India, potentially reversing recent outflows in FII. Trade realignments driven by US-China tensions could position India as a strategic partner, benefiting from strengthened economic and political cooperation. Despite occasional trade disputes, the US views India as a valuable counterbalance to China, with a strong alignment in defense, clean energy, and security. This alignment could lead to increased FPI inflows and bolster India’s foreign policy and economic growth trajectory.
Boost for the Textile Sector
As per JM Financial Report, Trump has a pro-business stance, which includes tax cuts and deregulation policies. It will lead to higher demand in the US economy, which eventually will improve the customer retail sentiment. How does it benefit India? With improved customer sentiment, the demand for imported goods, including apparel. India is a major exporter of apparel and textiles to the US, and it could see a rise in demand for its products. Therefore, the textile companies (those exporting to the US) are likely to benefit.
To Sum Up
Overall, the change of power in the US may lead to short-term volatility in the Indian market. However, in the mid to long term, India’s growth story is intact, and if you have not been part of it until now due to a lack of knowledge or otherwise, it is time to get started. Our Stock Portfolio Builder helps you get started with direct equity investment in a few easy steps. Our AI Stock portfolio takes care of everything – portfolio creation, monitoring, and risk management.
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