2 weeks Ago
The US election is probably the biggest event in the world right now. On November 5, the US will vote to elect its next President. The United States of America is the world's largest economy and a major military power.
Hence, its policies and strategies can potentially affect everything from global economic growth to peace efforts. The outcome of the US Election 2024 will influence the US foreign policy, trade agreements, defence strategies, and global markets. The US presidential race remains highly uncertain, with Kamala Harris and Donald Trump locked in a tight contest.
Recent opinion polls suggest that the final outcome could be announced several days after voting concludes. Trump vs Harris: What if..
.? The final outcome of the presidential election will influence several things for the Indian economy and markets. The key impact of the election outcome would be on the India-US bilateral ties in defence, trade and strategic sectors.
The US is a leading investor in India, particularly in technology, infrastructure, renewable energy, and manufacturing sectors. Experts point out that Trump's economic policies could lead to higher inflation. He wants to put tariffs on imports, which would make foreign goods more expensive, and he is pushing companies to produce more in the US, which could also raise costs.
According to brokerage firm JM Financial, Trump's policies are relatively expansionary in nature. He has indicated his preferences for lowering tax rates for corporations, especially those manufacturing in the US. Moreover, he has expressed his intentions to impose nearly 60 per cent or higher tariffs on imports from China and 10-20 per cent on the rest of the world.
He has also discussed the mass deportation of illegal immigrants, which could impact the labour supply, cutting aid to Ukraine, reducing participation in NATO while continuing to support Israel and Taiwan, and increasing influence over the Fed. JM Financial believes Trump's policies could lead to higher interest rates, a strong US dollar and a slowdown in global growth. On the other hand, Harris’ policies are largely status quo.
"She has indicated her preference for (1) increasing spending through an increase in taxes on corporations and wealthy Americans and not raising taxes on anyone making less than $400,000, (2) status quo on tariffs (continuing with the tariffs levied by Trump and Biden previously), (3) taking steps to curb the inflow of incremental illegal immigrants (but not mass deportations), (4) continued support to Ukraine, NATO, Israel and Taiwan, and (5) not influencing the Fed," JM Financial pointed out. Sectors that could be impacted According to Santosh Meena, the head of research at Swastika Investmart, investors may want to keep a close watch on commodity stocks for two key reasons ahead of the upcoming US election. First, if Trump wins, a push for fiscal expansion is anticipated, potentially leading to inflation, which tends to benefit commodity-linked sectors.
Second, there are expectations of further stimulus measures from China, which would likely boost demand for commodities globally. In addition to commodity stocks, Meena said the healthcare sector is worth considering as a defensive play. "Healthcare often performs well in times of economic uncertainty, offering a buffer against potential market volatility," said Meena.
Nitin Aggarwal, the director of investment research and advisory at Client Associates, said if Democrats return to power, the impact on the global economy, including India, is expected to be minimal as the status quo will continue. However, if Republicans assume power (Trump), we expect the resumption of trade wars led by increased tariffs, he added. Aggarwal pointed out that India’s exports to the US include IT services, pharmaceutical drugs, and gems and jewellery.
Aggarwal observed that the sectors that could be potentially impacted by the US election outcome include pharmaceuticals, as the Indian generic drug exports to the US may face tariff revisions, potentially affecting the pharmaceutical sector. Moreover, a slowdown in US discretionary spending due to trade wars could negatively impact India’s IT exports. "We envisage that the pharma sector might be impacted a bit as tariffs for generic medications get revised (generic drug manufacturers in India will be impacted)," said Aggarwal.
"If interest rate cuts are delayed in the US, FPI flows into India might further dry up. Any delay in US rate cuts could also delay India’s repo rate cuts, prolonging pressures on the Indian economy, which is already seeing a slowdown in earnings growth. If the US economy slows down as a result of trade wars, then the Indian IT sector will also take a hit as discretionary spending in the US will be negatively impacted," Aggarwal said.
Sonam Srivastava, the founder and fund manager at Wright Research, believes a potential Trump victory could favour traditional energy industries through deregulation, benefiting oil, gas, and coal companies. Conversely, a Harris administration is expected to bolster renewable energy initiatives, supporting sectors like solar, wind, and electric vehicles. "The financial sector, particularly regional banks, may gain from deregulation under Trump, while healthcare companies with exposure to Medicare Advantage could also benefit.
Technology and infrastructure sectors are poised for growth, with both candidates expressing support for development in these areas," said Srivastava. Srivastava believes Indian investors should monitor sectors with significant exposure to US policies, such as IT services and pharmaceuticals, as changes in trade policies and healthcare reforms could have ripple effects. "A diversified investment approach focusing on sectors poised to benefit under various scenarios can help mitigate risks during this period," said Srivastava.
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