A sharp rally in domestic shares following Donald Trump's win in the US election was largely in line with expectations, as there were hopes that he would cut corporate tax, boost the US spending and take initiatives to ease geopolitical tensions.
For India, analysts said Trump's second term as President after a gap of four years is expected to bring both opportunities and challenges across trade, defense, immigration and technology.
The US accounts for 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 service exporters, particularly of IT and professional services and the US is an important customer of India’s services sector. But it is also the fact that India is largely a domestic demand-driven economy.
Trump's protectionist trade policies could lead to higher tariffs or stricter rules, potentially affecting Indian exports to the US, said Ajay Garg, Director and CEO, SMC Global Securities. However, his strategy to reduce US dependence on China might create new opportunities for Indian manufacturers and tech firms as alternative suppliers, Garg said.
"Global markets experienced a relief rally following the US election results, reducing political uncertainty, with Trump securing a strong mandate. This has led to risk-on sentiment, driven by expectations of tax cuts and increased government spending. The domestic buying was broad-based, with IT leading the charge in anticipation of rebound in US IT spending, said Vinod Nair of Geojit Financial Services. In defense, a continuation of his first-term approach, including strengthening US-India ties through initiatives like the Quad, would enhance security cooperation, benefiting India, analysts said.
Trump's focus on revitalising US manufacturing may also encourage global companies to set up production in India.
"On a positive note, Trump’s proposal to reduce the corporate tax rate for domestic production from 21 per cent to 15 per cent could benefit IT services demand by alleviating budgetary constraints for US firms. This would benefit companies like TCS and HCL Technologies," Ajay Garg, Director and CEO at SMC Global Securities.
The analyst said Trump's reduced emphasis on climate action may reduce US support for India's renewable energy sector, which would be positive for companies such as NTPC and SJVN, although his pro-business stance could spur investments in strategic technologies like 5G, benefiting companies like Reliance Industries and Bharti Airtel.
Overall, while a Trump presidency could strengthen defense ties and open trade avenues, it may also bring challenges in terms of trade barriers, immigration restrictions, and climate cooperation, Garg said.
ICICI Securities said the Republican method could set in motion higher tariffs and tax cuts – usher in fiscal deficit pressure and become a vehicle for inflationary tendencies.
"As a domino effect, the dollar could weaken – akin to Trump’s previous Presidency, when the Dollar index fell and fiscal deficit rose. In the same vein, camp Trump’s protectionist policies (tariffs, immigration) could be a curve ball for global trade – already reeling under the Red Sea crisis and container shortages," ICICI Securities said.
Nomura India in a note earlier said it sees India as a relative beneficiary, due to its domestic demand-driven growth model, which benefits from lower commodity prices and supply chain shifts. The brokerage had expected , the economic impact on India under a Trump US presidency to be limited. It anticipated GDP growth impact of a mere 0.1 percentage points, while it suggested a neutral inflation impact.