Stock markets globally are jittery as millions of US voters are ready to cast their votes to select the next US President today. Sensex and Nifty fell in early trade, as analyst views largely vary on whether the Donald Trump-led Republicans or the Kamala Harris-led Democrats would be positive for India.
Nomura India believes a Trump win is likely net-negative for Asia ex-Japan stocks, while it sees Harris as net-positive. In the betting markets, Trump has lost some earlier momentum, with Trump/Harris odds now almost neck-to-neck.
"Our US economics team notes that US swing states will be the ones to watch on elections night (Wednesday morning Asia) where early swing state calls will likely signal the candidate with greater momentum, given that polling errors tend to be correlated across swing states. A unified government is the most likely scenario under a Trump victory, while a divided government would be likely under Harris," the foreign brokerage said.
Emkay Global said stock markets may temporarily rejoice the spillover of US equities rebound in case of a Republican (Trump) sweep . Not to mention, China equities would bleed due to increased market uncertainty and it could also be tactically positive for India on the FPI positioning and flows front, it said.
"However, there will be challenges sustaining that rally globally, and domestically as well. Our equity strategy team believes that a Red Sweep would probably trigger a short-term rally but its sustenance depends on earnings momentum and valuations, both of which are weak," Emkay said.
JM Financial has come out with a report on likely impact of US elections and, especially a Trump win, on 13 domestic sectors:
Banks and NBFCs A Democrat outcome may result in RBI rate cut. This would be positive for NBFCs, whose shares had rallied from July to September in anticipation of a rate cut by the US Fed.
"Due to recent correction, stocks are reasonably valued while the underlying argument of fixed rate asset books well-placed in a declining rate cycle still holds. Within the banking space, sharp rate cuts should see NIM compression for the sector as a whole (large private banks to be relatively better placed)," it said.
A Republican outcome could lead to a tighter interest rate regime in US (and thus a stronger dollar), which could keep RBI on the backfoot with respect to interest rate cuts. This could ensure interest rates in India do not come down in a hurry and hence the expectation of NBFCs outperforming banks may not hold.
PSU banks could be relatively beneficiaries here given recent correction and palatable valuations, JM Financial said.
Insurance A steep yield curve is good for the life insurance space. The Democrats staying in power implies sharper rate cuts, which will be good for life insurers, JM Financial said. A Republican outcome could be negative at the margin for Insurance companies, it said.
IT Services Trump, in his previous stint, tried to curb the H-1B visa programme. His policies led to increased H-1B rejection rates, higher H-1B/L-1 visa processing charges and wage inflation for H-1B resources. Similar policy stance cannot be ruled out in his second term. That said, India IT Services players are more insulated now from such anti-immigration policies than they were in 2016, JM Financial said.
"All players have ramped-up local hiring in US. Majority of their US employees are now not dependent on visa (local/green card holders). The impact of such policies on players' ability to deliver service or impact on margins due to cost inflation could therefore be limited," JM said.
Pharmaceuticals JM Financial said Biden-Harris let Medicare directly negotiate prices of select prescription drugs (takes effect from 2026). Medicare's ability to negotiate is limited to certain high expenditure (at present 10 drugs) single source drugs (without generics/ biosimilar competition). Lower drug prices due to this negotiation could be negative for innovator companies. Prima facie this is neutral for Indian generic companies.
"Many Republicans want to repeal this. However, the Trump administration has remained discreet about their plans. Harris has mentioned that she would like to accelerate the speed of negotiations. This could result in extended list of drugs up for negotiation," JM said.
Democrats have increased the population pool eligible for subsidised health insurance as well as the size of subsidies under the Affordable Care Act (ACA). These 'enhancedsubsidies' are set to expire in 2025. Republicans, on the other hand, have not been forthcoming on their plans for the ACA. However, many have stated these benefits should expire, which is negative for the overall healthcare space. A Harris administration would like to make these subsidies permanent, which can be a neutral-positive event for the overall healthcare space, JM Financial said.
Auto ancillaries A Trump win and increased tariff on China imports would mean China+1 de-risking can accelerate and may benefit Indian auto ancillary companies in terms of higher exports. However, protectionist policies by Trump might require Indian companies to invest in US to localise supplies, which were otherwise exported from India, JM Financial said.
Oil & Gas Trump's pro oil & gas policies could be a bit bearish for global oil price as it could incentivise investment in US shale assets. Trump's promise to end Russia-Ukraine war and Middle East tension could eliminate geopolitical risk premium from oil price. Trump's likely approval for new US LNG export plant could lead to normalisation of spot LNG prices from current high levels.
Real estate, commercial real estate and flex operators (Offices) Delays in rate cuts could impact demand at the lower end of the real estate market. Trump’s "America First" and anti-immigrant policy could impact IT/ITes (did not play out in his first term). India is the biggest market for offshoring and has the highest number of GCCs globally. Both sectors (IT/GCCs) are big employers and the largest occupiers of offices in India. Hence, an inward-looking policy by Trump can impact the fortunes of the office landlords (REITs/DLF etc.) and the co-working/ flex operators.
Commodities Commodities witnessed steep tariffs in Trump's previous tenure, effectively disrupting efficient price discovery. With regionalism and ring-fencing in commodities picking pace, metal prices could inch up under a Trump regime.
Chemicals Higher tariffs on Chinese imports under Trump could result in higher competitiveness of Indian chemicals exporters. Hence, despite the imposition of 10-20 per cent tariffs on Indian imports, chemical exports from India could see a meaningful jump.
Solar cells and module exporters US imposed barriers on import of solar PV cells/ modules from China and export of solar modules to US from India grew from Rs 600 crore in FY21 to Rs 10,500 crore YTDFY24. Further measures under Trump can benefit solar cell/ module exporters.
Textiles A stronger US economy under Trump could improve retail sentiment and potential imports of apparel from India.
Tiles Morbi players have exposure to USA and, hence, if Trump wins they could benefit from higher duties on China. Higher exports from Morbi could help improve domestic volume growth and realisations for domestic focused tile brands.
Wires & cables Higher tariff on Chinese wire and cables companies could also benefit domestic exporters of wires & cables to the US.