Know the Impact of Changes Brought by Trump on India and Its Stock Market

Investors are trying to figure out how Trump's second term will affect India and its stock market. One thing is for sure with the new government in the US, there will be changes in the US foreign and economic policy, and India may be affected positively and negatively.

Indian investors look forward to changes in trade deals, geopolitical strategies, and tariff regimes, as these may impact Indian companies. In this article, we look at the areas (impacts) that may be impacted by Trump's coming to power. And, as a result, how the Indian stock market will be influenced.

Impact 1: Renewable Energy Companies

It is a well-known fact that Trump is a fan of fossil fuels - the same was seen in his first term. Now that he is in power again, the trend will continue. India has been focusing on green energy, and now, with Trump in power, it could face some challenges. In the first term, the US supported oil and gas industries, and if the same happens in Trump's second term, Indian companies that depend on the US for export orders or growth will be impacted. Chances are that Trump's government will put tariffs on wind turbines and solar panels.

India is pushing hard towards green energy initiatives. However, these policies will slow the momentum of the Indian companies as they rely on affordable imports of technology and raw materials.

Impact 2: Indian Export Companies to Gain & Lose

Trump’s return as US President is likely to bring mixed implications for Indian export companies, particularly in sectors like IT, pharmaceuticals, textiles, and engineering goods, which rely heavily on the US market. Let us look at some areas:

Tariff and Trade Imbalance Concerns: Historically, Trump has pushed for reducing trade deficits, which could lead to higher tariffs on Indian goods. The US is India’s largest export destination, contributing approximately 18% to total exports in FY24. A renewed focus on addressing trade imbalances could pressure Indian exporters, especially in sectors like chemicals, textiles, and metals.
Sectoral Opportunities: Despite potential challenges, there may be opportunities for Indian exports to leverage their competitive advantage over China in sectors such as electronics, machinery, and textiles. India has seen growth in these exports due to shifting global supply chains, and Trump’s tough stance on China might further open doors for Indian businesses in the US market.
IT and Visa Policies: The IT sector, dependent on H-1B visas, could face headwinds if Trump reinstates stricter immigration policies. However, this could encourage companies to focus on domestic capacity-building under India’s "Atmanirbhar Bharat" initiative.

Impact 3: Defence Sector to get boost

Trump's second term could create significant opportunities for the Indian defense sector. During his first term, the US-India defense partnership saw substantial growth, with major deals such as the acquisition of Apache helicopters, MH-60 Romeo helicopters, and Sig Sauer assault rifles by India.

A renewed Trump presidency would likely continue this trajectory, emphasizing military sales, joint defense initiatives, and strategic collaboration, particularly in the Indo-Pacific region, where US-India cooperation is key to countering China's influence.

At the same time, challenges may arise, particularly regarding India's demand for greater technology transfers and localized production as part of its Atmanirbhar Bharat initiative. While Trump 2.0 might promote "America First" defense exports, India's insistence on local manufacturing and technology-sharing agreements will be crucial in expanding the partnership.

Impact 4: Infrastructure & Rail Companies

Under Trump's previous administration, heightened tariffs on Chinese imports led many global companies to diversify their supply chains away from China. If similar policies are reintroduced, India could emerge as a favorable destination for manufacturing and infrastructure investments, further bolstered by its "Make in India" initiative. It could increase demand for transportation and rail infrastructure to support supply chain logistics.

Trump's focus on domestic infrastructure during his presidency indirectly stimulated demand for raw materials and equipment globally. If this policy continues, Indian companies involved in construction materials, railways, and related infrastructure sectors could benefit from increased exports and collaborative projects.

Before you go

Donald Trump's second term is expected to bring a mix of protectionist policies, more military spending, and changes in global trade, which will affect Indian markets with both challenges and opportunities. Investors will need to stay informed and flexible to handle potential market ups and downs.

By understanding how Trump’s policies might affect sectors like renewable energy, defense, and fintech, Indian investors can prepare to take advantage of these changes. While the near future might be unpredictable, it will also bring new opportunities—if you are ready to take advantage of them.