With the return of Donald Trump to the White House, the Indian stock market revived and added ₹7.75 trillion to the investor’s wealth basket on the day of winning. This happened with the anticipated positive stance and pro-business approach of the world’s largest economy king. Along with that, the expected tech sector push, reduced regulations, and corporate tax rate cuts in the US might have a positive ripple effect on the Indian economy. In this blog, we’ll go through the stock market reactions after the Trump win and how it can benefit and distort the Indian economy in the long run.
Stock Market Performance On Trump Winning Day
The benchmark index Nifty 50 closed with a growth of 1.12% to 24,484.05 points on Wednesday i.e., on November 6, 2024. BSE Sensex also rose by 1.13% and closed at 80,378.13 points with Donald Trump taking the seat of US president again.
Domestic institutional investors (DIIs) took the buying stand of ₹4,889.33 crores while Foreign institutional investors (FIIs) sold Indian equities worth ₹4,445.59 crores on November 6, 2024. The Nifty rose with the growth in IT stocks such as Infosys, TCS, and HCL Tech along with Reliance and L&T.
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Here is the summary of Indian and other global stock market indices reaction on the November 6, 2024:
| Gainers | Losers | ||
|---|---|---|---|
| Nifty (India) | 1.1% | FTSE 100 (UK) | -0.07% |
| Sensex (India) | 1.1% | SSEC (China) | -0.09% |
| Dow Jones (US) | 3.2% | CAC 40 (France) | -0.5% |
| S&P (US) | 2.1% | Kospi KS11 (Korea) | -0.5% |
| Nasdaq Composite (US) | 2.3% | DAX (Germany) | -1.1% |
| Nikkei 225 (Japan) | 2.6% | PSEI (Philippines) | -1.3% |
| KLSE (Malaysia) | 0.8% | Jalsh (South Africa) | -1.4% |
| STI (Singapore) | 0.6% | Bursa (Indonesia) | -1.4% |
| TWII (Taiwan) | 0.5% | HSI (Hong Kong) | -2.2% |
Stock Market Performance on Next Day After Trump Win
The next day after the Trump Win, the Nifty 50 index dropped by 1.23% to 24,183.05 points while the Sensex also fell by 1.09% to 79,501.74 points on November 7, 2024 (at 10:35 AM).
Nifty Midcap 100 and Smallcap 100 both fell by 0.5% including the fall of Nifty Metal, Pharma, IT, and Auto.
Out of the 50 stocks of the Nifty index, only the Apollo Hospitals and Tata Steel were trading in green. The expectation of fewer fed cuts and a rise of tariffs on imports to the US could be the trigger points for the fall in the Indian stock market. The rise in crude oil prices and all-time low rupee value are also negative factors.
Positive Impact on Indian Economy with Trump Win
1. Rise in Indian Exports
With the expected negative stand of Donald Trump on China and the possibility of increasing tariffs on China’s imports to the US, India may benefit. This will have a positive impact on India’s exports to the US and companies related to auto parts, chemicals, and solar panels could benefit. If Trump takes a strong stand against China, then Indian startups may also get more investments through the FDI route.
2. Defense Sector
Trump may give a push to the US manufacturing and military capacities and try to make it a global powerhouse. The supply chain would ease down and it will indirectly benefit Indian industrial and defense players such as ABB, Siemens, Cummins, Honeywell, Bharat Dynamics, and Hindustan Aeronautics.
Also read: Best Defence Stocks to Buy in 2024
3. Oil Companies
Trump’s take on strengthening fossil fuels could lower the commodity prices. This will have a positive impact on Indian oil and gas distribution companies such as HPCL, BPCL, Mahanagar Gas Ltd (MGL), and Indraprastha Gas Ltd (IGL).
Negative Impact on Indian Economy with Trump Win
1. Strengthening of Dollar
On the day of the Trump Win, Dollar recorded the largest one-day jump in the last two years. This in turn could raise the US bond yield with tax cuts and fiscal stimulus. All this will lead to an inflow of capital towards the US which might put pressure on the Indian Rupee. The rupee will depreciate more as the investors might take off their investments.
2. Inflation Push
Donald Trump’s plans on raising tariffs coming into the US from China and other countries, and deportation plans could push up inflation and wages. Indian companies that are dependent on the US for raw materials and machinery could be negatively impacted by a rise in import costs. Also, the dollar strengthening could make imports expensive which in turn increases the inflation in India.
3. Heightened Volatility
With the uncertainty following the Trump policies agenda, this might increase the volatility in the Indian stock market in the long term. With the more happy environment in the US stock market, Nasdaq gave 77% returns against the Nifty return of 38% in Trump’s first tenure from 2017-2021.
4. Immigration Challenges
In Trump’s first presidential rule, some H-1B visa curbs led to a rise in rejection rates, processing fees, and wage inflation impacting mainly the Indian IT service sector. The Indian IT employees and companies seeking overseas opportunities might be affected.
5. Tariff Pressure
Trump may pressure India to cut tariff rates because high rates affect US businesses working in India. Sectors like IT, pharmaceuticals, and textiles which are heavily exporting to the US could be hampered as Trump might react with higher tariffs. Trump’s election manifesto also highlighted that the US could impose a 10% duty on imports coming to the US and a 60% tariff on goods coming from China.
6. Rise in US Fiscal Deficit
Trump’s policies are said to have a deeper impact on the US fiscal deficit leading to higher inflation and interest rates. This could tighten the liquidity which makes it tough for India to reduce interest rates in order to attract money into the country.
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Sectors Benefited from Trump Last Rule in 2017
In the previous presidency of Donald Trump, India’s benchmark index Nifty 50 generated a positive market return of 75.40% from 2017-2020. There are few sectors in India that specifically benefited from Trump’s last rule in 2017.
1. Information Technology
With Trump’s views on bringing IT jobs to America and the affected rupee weakening, IT outsourcing companies fear a massive fall. However, the Indian IT industry turned bullish on the backdrop of the push by America on domestic manufacturing and infrastructure and higher demand for automation and AI. A few major Indian IT companies like TCS, Wipro, and Infosys benefitted the most with their tech presence globally. Nifty IT, the sectoral index, also generated a whopping return of 162.71% in the period of 2017-2020.
2. Energy and Defense
Trump increased the defense spending in the US which converted to more opportunities for Indian defense companies such as HAL, L&T, and Bharat Electronics. The Indo-Pacific strategy also leads to more defense deals between the US and India. The Nifty Energy index rose by 69.08% in the period of 2017-20.
3. Automobile
The automobile sector rose on account of the export push and demand for affordable automobiles in the US. Indian auto stocks like Maruti Suzuki, M&M, and Tata Motors experienced an upside. In 2017-20, the Nifty Auto sector rose by 8%. This time as well there might be more pressure on the Indian economy to open up for the EV sectors.
4. Banking and Financial Services
After January 2017, India’s BFSI sector gained with Donald Trump’s views on tax rate cuts, regulatory easing, and infrastructure development. This trimmed down the effect of demonetization in India in November 2016. India’s digitization and financial inclusion also added to the momentum and banking stocks like HDFC Bank, Axis Bank, and ICICI Bank noted a rise. Between 2017-2020, the Nifty Bank index rose by 72.91% while the Nifty Financial Services index rose by 108.69%.
Conclusion
With Donald Trump taking the seat again as the US President, India’s stock market has turned bullish led by the IT stocks. This new government could benefit India’s export-focused sectors like pharma, defense, etc. His business-friendly approach and corporate tax cuts in the US are expected to fuel the Indian economy. However, there might be some challenges for the Indian economy with heightened volatility and Trump’s tough economic stance on tariffs. With the current positive expectations towards India’s stock market, you can also take your first step towards investing. So, open demat account with SMC Global Securities now.
FAQs
1. Which sectors will benefit from Trump Win?
It is expected that the export-major sectors in India such as IT, pharmaceuticals, defense, and textiles may benefit from the 2024 Trump win.
2. How India’s stock market indices reacted after Trump Win?
Indian stock market’s two major Indices, Nifty and Sensex both rose by around 1.1% on the day of the Trump win.
3. How Indian Rupee impacted on the day of Donald Trump Win?
Indian Rupee depreciated to a record-level low of 84.28 per US dollar on the day of Trump’s win (November 6, 2024). This happened due to the stronger dollar index which put pressure on emerging economy currencies like India.
Author: All Content is verified by SMC Global Securities.
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