 "Donald Trump vs Kamala Harris: Who is better for Indian equities?")
Battle lines are drawn in a hard fought election battle in the United States (US), the outcome of which will be known this week. However, global financial markets, analysts said, have already begun preparing for Donald Trump's victory.
A Trump win in November 2024 polls, experts believe, is likely to benefit Indian auto, energy and metal sectors, while being neutral for the pharmaceutical space.
Business-wise, the US accounts for around 18 per cent of India’s merchandise exports, and the biggest export items include electronics, pearls & precious stones, pharmaceuticals, nuclear reactors, petroleum products, and to a lesser extent, iron & steel, autos and textiles.
India is also one of the world’s top services exporters, particularly of IT and professional services, to the US.
Should Trump win in November, inflation, said Nigel Green, chief executive officer of deVere Group, a global consulting firm managing nearly $12 billion in assets under management, is expected to rise as trade policies lead to higher import costs.
This, in turn, he believes, could prompt the US Federal Reserve (US Fed) to adopt a less aggressive approach to rate cuts, as the central bank would seek to balance inflation control with economic growth.
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“We’re seeing a global trend where investors are recalibrating their portfolios to capitalise on a strengthening dollar while preparing for the potential inflationary effects of Trump’s trade policies. With expectations of a stronger dollar, higher inflation, and, therefore, fewer interest rate cuts, clients around the world are seizing the opportunity to strategically position their investments,” he said.
A proposed 10 per cent blanket import tariff and 60 per cent tariff on Chinese imports by Trump (if reelected), analysts at HSBC said, could shave as much as 8 per cent off US earnings, and have a bigger impact on the rest of the world.
In contrast, Harris’ policies, according to analysts at Rabobank International, would lead to a continued decline in inflation to the Fed’s 2 per cent target and allow it to continue its cutting cycle in 2025.
Market performance
The US and Indian equities, however, have rallied during both Trump 1.0 and Joe Biden’s regimes. While the S&P 500 and the NASDAQ moved up 70.2 per cent and 142.9 per cent under Trump 1.0, both these indices gained 50.8 per cent and 36.8 per cent under the Biden administration, as per Bloomberg data. MARKET MOVES
(Trump 1,0:January 20, 2017 to January 20, 2021, elected on Nov 8, 2016; Inauguration on Jan 20, 2017; Biden Jan 20, 2021 till date; Source: Bloomberg)
| Trump | Biden | |
| As on Oct 25 | Change % | Change % |
| DJIA | 58.1 | 35.9 |
| S&P 500 INDEX | 70.2 | 50.8 |
| NASDAQ | 142.9 | 36.8 |
| Nifty 50 | 73.6 | 64.5 |
| SENSEX | 82.3 | 59.0 |
The Sensex and the Nifty back home, on the other hand, gained 82.3 per cent and 73.6 per cent under Trump 1.0, and moved up 59 per cent and 64.5 per cent under the Biden administration, data shows.
“We believe Harris’ win will be neutral / mean continuity for the economy, equities, and other asset classes. Trump would have a reasonable impact on emerging markets (EMs), equities, and currency due to de-globalisation. Amongst EMs, we expect relatively positive impact for India in the long-run,” wrote Anjali Verma and Navaneeth Vijayan of Phillip Capital in a recent note.
A Democratic clean sweep would put into play policy proposals like corporate tax hikes and strict antitrust laws, HSBC said, which might weigh on US equity markets. Uncertainty about regulation, particularly on big tech and AI, they suggest could also hit market sentiment.
Harris’ victory with a divided Congress, however, would most resemble the status quo with minimal policy changes, and would expect markets to refocus on the current goldilocks backdrop.
“A gridlock scenario could result in higher uncertainty, especially regarding tax policies. If Donald Trump wins with a divided Congress, risks of a more serious escalation in trade tensions could weigh on global equities,” said Alastair Pinder, head EM and Global Equity Strategist at HSBC.
In terms of the overall domestic and foreign policy impact of Trump 2.0, the most positively impacted countries, according to Nomura, are Israel, Russia, Saudi Arabia, India, Australia and Japan, while the most negatively impacted are China, Iran, Mexico and Ukraine.