In 2024, Donald Trump secured another presidential win, marking a significant event for global markets, including India. Trump’s prior presidency had a lasting impact on global economic policies, trade relations, and investment trends. His return to office after a four-year hiatus reignited questions about potential shifts in international relations and economic policies, all of which have implications for markets worldwide, particularly in emerging economies like India. This article delves into the correlation between Trump’s 2024 victory and the Indian stock market, analyzing how changes in U.S. policy under his administration could influence India’s economic landscape.

1. Immediate Reactions to Trump’s 2024 Election Victory

The Indian stock market, like many global markets, experienced a mixed reaction when Trump was announced as the winner of the 2024 presidential election:

• Initial Volatility: Markets globally, including India, saw some volatility following the announcement. The uncertainty around Trump’s policy approach toward international trade, particularly with major economies like China, stirred initial caution among investors.
• Recovery and Market Sentiment: Following the initial shock, Indian markets began to stabilize as investors assessed Trump’s potential policies. His previous pro-business stance during his 2016-2020 term reassured some investors, leading to a recovery and steady movement in Indian indices such as the BSE Sensex and NSE Nifty.

2. Policy Implications of Trump’s 2024 Presidency on India

Trump’s return to office brings a renewed focus on several key policy areas that could impact India’s economy and stock market. Below are some of the potential implications:

a. Trade Relations and Opportunities for Indian Exports

One of Trump’s core agendas has been to recalibrate U.S. trade relationships. While his policies historically leaned toward protectionism, a shift in trade dynamics could create both challenges and opportunities for India:

• U.S.-China Trade Tensions: If Trump continues his hardline stance on China, India may benefit as a viable alternative for American companies seeking to diversify their supply chains away from China. This could present opportunities for Indian industries like electronics, pharmaceuticals, and textiles to increase exports to the U.S.
• Increased Demand for Indian IT Services: Given the U.S.’s heavy reliance on technology and India’s established presence in the IT sector, Indian companies might see an increase in demand from U.S. firms. American companies may seek cost-effective outsourcing options to maintain competitiveness, which could benefit major Indian IT firms like TCS, Infosys, and Wipro.

b. Potential Changes in Visa and Immigration Policies

Trump’s administration previously imposed stricter regulations on the H-1B visa program, which is widely used by Indian tech professionals to work in the U.S. If Trump enacts similar policies during his new term, it could have implications for India’s IT sector:

• Impact on Indian IT Firms: Indian IT companies rely heavily on the H-1B visa program to place skilled professionals in the U.S. If visa restrictions are tightened, companies may face higher staffing costs in the U.S., impacting their margins. This could lead to short-term volatility in the stock prices of IT giants like Infosys and TCS.
• Shift to Local Hiring and Long-Term Adaptation: In response to previous visa restrictions, many Indian IT firms increased local hiring in the U.S. A continuation of this trend could reduce their dependency on visas, potentially improving operational resilience and market sentiment in the long run.

c. Potential Shifts in Foreign Investment Policies

Trump’s presidency often attracted foreign investment into the U.S. due to his pro-business policies, tax cuts, and regulatory rollbacks. However, changes in interest rates, trade, and investment policies can affect emerging markets like India in various ways:

• Impact on Foreign Portfolio Investments (FPIs): If Trump implements policies that make the U.S. more attractive to investors, some capital may flow out of emerging markets, including India. This could put pressure on the Indian rupee and lead to short-term fluctuations in stock prices.
• Favorable Investment Climate in India: Conversely, if India can present itself as a stable, high-growth market, it could attract foreign investors looking for diversification. The Indian government’s focus on reforms and ease of doing business can enhance India’s appeal to global investors even amid U.S. policy changes.

3. Indian Sectors Likely to Be Affected

Trump’s policy approach has specific implications for different sectors of the Indian economy. Here’s a look at some of the key sectors likely to be impacted by his return to office:

a. IT and Technology Sector

The Indian IT sector has a long-standing relationship with the U.S. market. While visa restrictions pose challenges, Trump’s return could also create opportunities as American companies look to cut costs by outsourcing.

• Positive Long-Term Outlook: With the digital transformation accelerating globally, U.S. companies are likely to continue outsourcing IT and digital services. Despite visa restrictions, the sector’s growth potential remains strong, which could sustain long-term gains for Indian IT stocks.

b. Pharmaceuticals and Healthcare

India’s pharmaceutical sector is a major exporter to the U.S. Trump’s stance on reducing healthcare costs in the U.S. could affect Indian pharma firms, but there are opportunities as well.

• Generic Drug Market Expansion: Trump’s focus on affordable healthcare could increase demand for cost-effective generic drugs, an area where Indian companies excel. Major Indian pharma firms like Sun Pharma, Dr. Reddy’s, and Lupin could benefit from this demand.

c. Manufacturing and Textiles

With Trump’s policies likely to continue pressuring China, India could emerge as a viable alternative manufacturing hub for U.S. companies.

• Boost to “Make in India” Initiative: Indian manufacturers stand to gain as more U.S. companies seek to diversify their supply chains. The “Make in India” initiative, combined with favorable trade relations, could attract investments in sectors like textiles, electronics, and auto components.

4. Broader Economic Impact on India

The correlation between Trump’s policies and the Indian stock market extends beyond sector-specific impacts to broader economic trends:

a. Strengthening of the U.S. Dollar and Impact on the Rupee

Donald Trump’s return may strengthen the U.S. dollar if his policies attract capital inflows into the U.S. A stronger dollar could weaken the Indian rupee, impacting India’s import costs, inflation, and foreign debt repayment:

• Pressure on the Rupee: A strong dollar typically puts downward pressure on emerging market currencies like the rupee. For India, this could result in higher import costs, particularly for crude oil, which could affect inflation and India’s current account balance.
• Effect on Dollar-Denominated Debt: Many Indian companies have dollar-denominated debt. A weaker rupee increases the burden of repaying this debt, impacting companies with high exposure to foreign loans.

b. Inflation and Interest Rates

If Trump’s policies lead to increased U.S. interest rates, it could affect capital flows into emerging markets, making financing more expensive for Indian businesses and potentially slowing economic growth.

• Impact on Borrowing Costs: Rising interest rates in the U.S. may prompt India’s central bank to adjust its own rates to maintain a favorable interest rate differential, impacting domestic borrowing costs.
• Potential Capital Outflows: Higher U.S. rates could attract capital back to the U.S., creating short-term volatility in Indian markets and putting pressure on the Reserve Bank of India to maintain currency stability.

Conclusion

Donald Trump’s return to office in 2024 is likely to have both direct and indirect effects on the Indian stock market and broader economy. From trade relations and visa policies to foreign investment flows and sector-specific impacts, Trump’s policy decisions could influence the trajectory of the Indian market in multiple ways. While certain sectors may face challenges, others, like manufacturing and pharmaceuticals, could benefit from shifts in U.S.-China trade dynamics and increased demand for cost-effective products.