With the 2024 US Presidential election around the corner, Indian investors are paying close attention. While it may not cause an immediate shock in India’s stock markets, the long-term ripple effects on global trade, currency strength, and investment policies are bound to leave a mark.
Experts believe that the economic policies of the next US President could directly influence India’s exports, foreign investment, and even the strength of the Indian rupee. So, what should Indian investors be prepared for? Let’s dive into how the US election could impact them in five key ways.
1. Impact on Global Market Sentiment
The US elections always inject a sense of uncertainty into global markets, and this one will be no different. If there’s volatility in the US stock market due to policy shifts or changes in leadership, Indian markets could experience ripple effects. Subho Moulik, Founder and CEO of Appreciate, notes that short-term market swings following the election should be taken lightly, as they often reflect correlation rather than causation.
2. Trade Policies and the IT Industry
Trade policies under the new US administration could reshape India’s export-driven sectors. If Kamala Harris takes office, she’s expected to maintain the trade-friendly stance of the Biden administration, which could mean continuity for India’s IT services, textiles, and pharmaceutical exports. But if Donald Trump returns, his hardline stance on trade imbalances and immigration—particularly H-1B visa restrictions—could hurt Indian professionals working in the US.
Deepak Jasani from HDFC Securities predicts that Trump’s transactional approach could create roadblocks for Indian industries that rely heavily on US markets. In contrast, Harris may be more inclined to nurture the long-term US-India trade relationship.
3. Rupee vs. Dollar: Currency Battle
Election outcomes in the US can drastically influence the strength of the US dollar, and consequently, the Indian rupee. A stronger dollar typically results in capital outflows from emerging markets like India, which could weaken the rupee. Indian investors will have to stay vigilant about the global currency trends that may emerge post-election.
4. Foreign Direct Investment (FDI)
US policies will also impact the inflow of foreign direct investment into India. According to Arpit Jain, Joint MD of Arihant Capital, the US-India strategic partnership is likely to remain robust, no matter who takes office. India’s growing importance in the Indo-Pacific and its positioning in the US’s larger geopolitical strategy means that the FDI outlook may stay positive despite leadership changes.
5. Interest Rates and Market Liquidity
Perhaps one of the most significant factors will be how the Federal Reserve reacts post-election. A Trump win could push the Federal Reserve to adjust interest rates, either making it more attractive for foreign investors to pour money into India’s markets or, conversely, causing capital outflow if rates are hiked.
“If interest rates decline further, India could see a surge in foreign investments,” said Jain. However, if rates increase, Indian equities and bonds might take a hit due to foreign investors pulling out.
Final Take: Prepare for Uncertainty
While the 2024 US Presidential election won’t immediately rock India’s stock markets, investors must be prepared for the longer-term economic impacts. Policies surrounding trade, investment, and interest rates will shape global sentiment, and Indian markets are not immune. The key for Indian investors? Stay patient, be mindful of the US-India relationship’s trajectory, and keep an eye on global market trends as the election unfolds.
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