With Donald Trump’s return to the White House as the 47th President of the United States, the expectations suggest that the Trump 2.0 will be positive for US equities and price in net positive outcome for India although with some indirect impact of tariffs. Further, as far as monetary policy is concerned, the Fed is expected to be hawkish in the longer term under Trump 2.0 unless inflation and growth surprise broadly on the downside, stated a report by Elara Securities. For India, experts remained positive on IT, Pharma, EMS and Defence sectors in equities but see UDINR spiraling to 84.5 amidst firmer USD and US 10y yields. India
For India, it represents an opportunity to reinforce the bilateral relationship with the US, even if it poses some direct challenges for the country, including higher tariffs and restrictions on visas, as well as possibly more volatility in the foreign exchange markets.
The radical economic outlook presented by Donald Trump includes imposing a 20 per cent tariff on all imports and more than 200 per cent duty on cars, proposal to deport millions of irregular immigrants, and to extend tax cuts at a time when the US budget deficit is at record high. If he goes ahead with these proposals, they could present some macroeconomic challenges. With the Republicans holding a majority in the Senate and leading in the House of Representatives, Trump will have a stronger position to push through his policies.
Trump 2.0: Positive for US equities
The return of Donald Trump to power after his stint in 2016-2020, Elara Securities said, is positive for US equities. “The corporate tax cuts (promised at 15 per cent for domestic manufacturers from 21 per cent currently) should help broaden the rally beyond Big Tech and spur buy-backs, thus boosting stock prices in the US,” stated the report by the brokerage firm, while adding that the rise in stock prices amid corporate tax cuts, improved profitability and buybacks will spur US equities.
Trump 2.0: Hawkish Fed and firmer USD, US yields
With the start of Trump 2.0, Elara Securities said, “We see the Fed turning increasingly hawkish in the long run amid elevated fiscal risks, likely keeping inflationary risks alive. Fiscal impact of Trump Campaign Plans through 2026-2035 could see fiscal deficit, as a percentage of GDP, rising by 42bps (minimum), 219bps (average) and 442bps (maximum) from the baseline CBO projections through 2026-2035. If these translate into a rebound in inflationary risks, the Fed’s rate cut trajectory would blur even more.”
Trump 2.0: Broadly positive for India
Donald Trump’s return to power will benefit Indian equities as it spurs risk-on sentiment globally. However, challenges will linger with higher tariffs on certain Indian manufactured goods as Trump revives his ‘Make in America Plan’ and if this happens, the impact will also be felt by Indian producers. However, among the list of countries that will likely benefit from the anti-China stance of Trump, India would be the one.
Elara Securities said that the corporate tax cuts in the US could propel IT spending in the country, which in turn could benefit Indian IT companies. “Additional tailwinds continue to remain in the form of increased liquidity via Fed rate cuts and resilient US growth. Also, weaker INR will aid in the bottom lines. Weaker Rupee and continued anti-China policies could also benefit Indian pharma, though do watch out for any decision on drug price controls especially on prescription drugs- a measure that was initiated in 2020 during Trump’s first term,” the analysis report stated.
Further, higher collaboration is expected with India on security issues in the Indo Pacific region, which would propel greater partnership in defence engagements, thereby benefiting the Defence sector.
Also, focus on fracking and raising US oil & gas output should keep oil prices muted, which should benefit OMCs and value chain users of crude oil and substitutes. “We expect high tech sectors such as AI, semiconductors and EMS to continue to be in favor as diversification of supply chains remains aggressive amid rising investments in AI (recall NVIDIA-Reliance collaboration),” stated Elara Securities.
Trump 2.0: Anti-China policies could hit India
Per analysis by Elara Securities, India’s exports to the US may be hit if tariffs on China rise. India’s exports to the US for items such as textiles/ yarns/fabrics/readymade garments, IC engines/transport equipment, products of iron and steel, granites outpace the imports from China in those categories, suggesting manufacturing value add and/or assembly in India. If tariffs are imposed on China, it said, this process could be disrupted, leading to uncertainties. “Moreover, if the Chinese economy fails to recover and its domestic demand does not improve, India could face increased dumping pressure from China,” the report said.