The upcoming US presidential election on November 5 carries significant implications for global markets, including India’s economic landscape. With Americans set to vote in a tightly contested race, the result could bring notable shifts in international trade, investment flows, and commodity prices that influence India’s economy and stock market performance. Analysts are closely monitoring the potential effects of either a Kamala Harris or Donald Trump victory, as both outcomes offer distinct impacts for India’s market and sectors.
“The US, over the past eight years, have made a decisive switch from promoting free trade to resorting to increasingly protectionist policies. Tariffs against China in particular, and the rest of the world in general, would rise under Trump, but they won’t be reduced under Harris either,” Taimur Baig, Chief Economist at DBS Bank, wrote in a note.
Trump win
A Trump victory may favour India’s domestic growth trajectory by keeping crude oil prices low and providing relief to India’s import costs, benefiting oil marketing companies like BPCL, IOCL, and HPCL. Lower crude prices could, however, challenge the margins of upstream firms such as ONGC and Oil India. Furthermore, Trump’s policies, including restrictive trade practices and tariffs on China, could indirectly open opportunities for India, as global companies seek alternative production hubs and supply chain routes.
Under Trump’s leadership, a stronger US dollar and rising US Treasury yields could lead foreign investors to shift capital to US assets, potentially dampening flows into Indian equities. Indian markets could feel some volatility, especially in sectors dependent on global capital or export revenue. Nonetheless, India’s focus on domestic consumption may help the economy withstand some pressures that a Trump presidency might bring.
Harris Presidency
In contrast, a Kamala Harris administration is anticipated to maintain current global economic structures, potentially reducing volatility in emerging markets. While not expected to reverse recent protectionist trends, a Democratic win could ease pressures on US interest rates and the dollar, supporting a more favorable environment for Indian equities. Indian sectors like IT and pharmaceuticals may benefit from continued demand for skilled immigration and outsourcing support, which were prominent themes during the Biden administration.
Export-driven industries may also see stability under Harris, as her policies are expected to support moderate engagement in trade and regulatory consistency. This continuity could help Indian firms, particularly in pharmaceuticals and tech, as they navigate the US market with fewer disruptions.
Impact across key sectors
The US election outcome will likely shape several key sectors in India beyond headline indices. In information technology, for instance, both candidates are expected to press for onshoring, which could exert pressure on Indian firms reliant on US outsourcing. However, midcap IT companies might benefit from Trump’s approach of revoking China’s favored trade status, opening new markets.
In the pharmaceutical sector, both administrations share a common goal of lowering drug prices, with potential advantages for Indian generic drug manufacturers. While Republicans aim to foster competition among generics, Democrats may accelerate approval processes, benefiting companies with rapid market access.
Broader market sentiment
Indian markets have been reacting to the dual uncertainties of the US election and potential shifts in Federal Reserve policy. The recent pullback in the Nifty 50 index and the record withdrawals by foreign investors reflect cautious sentiment, with risk aversion growing ahead of November 5. Although past trends suggest that Indian markets often deliver positive returns after US elections, current valuations remain elevated, keeping some investors on the sidelines.
The US election’s outcome will likely continue to cast a shadow over global markets, but India’s domestic economy could benefit from reduced commodity prices, steady consumption, and gradual trade adjustments depending on the election result. As global markets brace for potential post-election fluctuations, India’s economy stands to navigate these shifts with both caution and potential opportunities on the horizon.
