US Elections 2024 and Its Impact on Indian Share Market

The 2024 US presidential election is set to be one of the most closely watched political events globally, not just for Americans but for investors worldwide, including India. In recent years, the political climate in the US has increasingly influenced global financial markets, including the Indian stock market. With India being the fifth-largest economy and a growing power in global trade and technology, investors are paying close attention to the implications of this election. Let us explore the potential impact of the 2024 US election on the Indian stock market.

US Elections 2024

The US elections was held on Tuesday, November 5, 2024. The winner will start the 4-year service in the White House starting from their inauguration on January 20, 2025.

Will the result be announced on the same day? Not necessarily. Due to mail-in ballots and the time required to count all votes, a winner may not be declared for several days. As of now, we don't know when the final results will be out.

Will the US Elections 2024 impact the Indian Share Market?

The US Presidential Election 2024 could impact India in different areas like defense, trade, and strategic relations between the two countries. The US is a major investor in India, particularly in technology, infrastructure, renewable energy, and manufacturing. The next US president's economic policies will directly influence India’s exports, investments, and overall economic growth. Let us look at different areas of impact:

Trade Policies and Bilateral Relations

US-India relations have deepened over recent years, particularly in trade and defense. Regardless of the election outcome, both nations see significant value in strengthening their economic ties. However, the approach toward trade policies may differ depending on whether a Democrat or Republican is in the White House.

For example,  a Democratic administration may continue focusing on climate-related policies, clean energy partnerships, and tech-sector collaboration. This could benefit Indian companies involved in green energy and technology, which aligns with the government’s push toward sustainable development.

Dollar Strength and Rupee Movement

The US election can impact the strength of the dollar, which directly influences emerging markets like India. Depending on the election’s outcome, we may see the dollar appreciating or depreciating, affecting the value of the Indian rupee.

For example, a stronger dollar generally results in capital outflow from emerging markets as foreign investors seek safer returns in dollar-denominated assets. This scenario could put downward pressure on the Indian rupee, making imports more expensive but benefiting export-oriented sectors like IT and pharmaceuticals.

Impact on Interest Rates and Global Liquidity

One of the most significant focus areas in the US election is the Federal Reserve's monetary policy. Both the president and the party in power can influence, albeit indirectly, the Fed’s approach to interest rates and inflation.

If the elected administration pushes for policies that require higher interest rates to control inflation, this could lead to reduced liquidity in the global markets. For India, this means a reduction in foreign portfolio investments (FPIs) and foreign direct investments (FDIs) as capital becomes more expensive to access.

Has the US elections in the past impacted Indian Markets?

US elections have historically impacted Indian markets due to shifts in US economic policies, trade relations, and global financial market sentiment. However, there is no direct and major impact of the US elections/results. Here’s a look at how past US elections influenced the Indian stock market.

2012 US Presidential Election: From January to December 2012, Nifty 50 gained around 27%, supported by global liquidity and low interest rates in the U.S. which drove foreign investments into emerging markets like India. Foreign Institutional Investments (FIIs) in India increased significantly. The year 2012 saw FII inflows of over Rs 1.3 trillion, with sectors like banking and real estate seeing major inflows.

2016 US Presidential Election: In November 2016, Nifty 50 fell by around 7% in the two weeks following Trump’s win, reflecting investor uncertainty. However, by year-end, it rebounded as the new administration’s economic agenda became clearer. Indian IT stocks such as Infosys and TCS experienced volatility, as the Trump administration’s H-1B visa restrictions impacted outsourcing prospects. The NIFTY IT index dropped by about 5% post-election.

2020 US Presidential Election: The Nifty 50 gained around 8% in November 2020 (the month of the election), as global investors reacted positively to Biden’s economic recovery plans. By the end of 2020, Nifty 50 had gained about 15%.  Sectors aligned with Biden’s climate agenda, such as renewable energy, saw increased interest.

Before you go

The US presidential election has the potential to impact the Indian stock market across sectors. The impact could lead to short-term volatility, but experts believe the market will settle soon and adjust to the election outcome. However, investors should keep an eye on the election outcome and adjust their portfolios to align with expected policy directions.