With Donald Trump’s victory securing him a second term in the White House, many wonder how his leadership will shape global financial landscapes—especially for Indian investors.
For those following US-India trade ties, Trump’s win has implications for trade policies, market fluctuations, and investment flows. But what does this mean specifically for Indian markets and investors?
Immediate Market Response To Donald Trump Win
A Donald Trump win triggered a swift response in the Indian markets. On November 6, Indian stock indices rallied, with the Nifty climbing above 24,500 and the Sensex jumping by 900 points, closing at 80,378.13. Gains were broadly distributed, particularly in sectors like IT, realty, oil & gas, and power, which surged by over 2%.
The mid-and small-cap indices also experienced a 2% boost, outperforming the benchmark. These gains suggest optimism among Indian investors, largely due to Trump’s business-friendly policies, which may align well with India’s growth sectors.
Bitcoin Surge and Impact on Indian Crypto Markets
As election results came in, Bitcoin crossed the $75,000 mark for the first time, indicating a solid rally fueled by “Donald Trump Trades.” Indian crypto exchanges such as CoinSwitch and CoinDCX reported increased trading volumes, with heightened interest linked to Trump’s endorsement of digital assets.
This shift points to rising optimism around cryptocurrency in India. It suggests that Trump’s pro-crypto stance could positively impact Indian crypto markets and investments in exchange-traded funds (ETFs) that offer exposure to digital assets. Source: Moneycontrol
Foreign Portfolio Inflows: A Renewed Focus on India
Donald Trump’s victory may also influence foreign portfolio investments (FPIs) in Indian markets. In October, FPIs shifted from net buyers to net sellers, with a sell-off of Rs 94,017 crore. However, Trump’s return could prompt renewed foreign investments in India, especially given the alignment of US-India trade interests.
With India viewed as a strategic alternative to China, a realignment of supply chains might encourage FPI inflows in technology, defense, and clean energy sectors. Both countries’ efforts to bolster mutual economic ties could drive steady capital inflows into the Indian markets, possibly reversing the recent trend of FPI outflows. Source: BusinessToday
Mutual Fund Performance and US-India Diversification
Investors in US-focused Indian mutual funds saw substantial returns in 2024, with some funds delivering gains of up to 38%. Notably, funds like the Mirae Asset NYSE FANG+ETF Fund of Funds, Mirae Asset S&P 500 Top 50 ETF, and Bandhan US Equity FoF recorded returns of 38%, 35%, and 31%, respectively. In comparison, domestic funds in India’s large, mid-, and small-cap categories posted 16%, 26%, and 25% returns, respectively.
As US-focused funds continued to outperform, Indian investors benefited from geographical diversification. Given Trump’s economic priorities, US markets could see continued stability, which would favor US-focused investments within Indian mutual funds and maintain robust returns for investors.
Source: MoneyControl
Trade Relations and Manufacturing Opportunities for India
Trump’s policies, often characterized by his “America First” approach, could benefit Indian manufacturers and exporters. His plans to tighten trade restrictions on China might lead more US companies to shift manufacturing operations from China to India.
This shift could open export opportunities for Indian businesses in the machinery, textiles, and chemicals sectors as companies look to diversify their supply chains. Stronger dollar values could further boost Indian exports, particularly in telecommunications, pharmaceuticals, and automotive components. Source: MoneyControl
Strengthening India-US Trade Relations
Under Trump’s administration, India and the US have built a solid partnership grounded in mutual economic goals, technological collaboration, and trade growth. Trump’s pro-business stance could deepen this alliance with the US, already a leading investor in India across sectors like technology, infrastructure, and renewable energy.
As the demand for skilled Indian workers rises in industries pivotal to both countries, India’s role in the global digital economy could strengthen, promoting cross-border growth in tech, renewable energy, and sustainable development. Source: Livemint
Geopolitical Considerations and Global Tensions
Trump’s foreign policy, particularly regarding Ukraine and the Middle East, may have ripple effects on global markets, including India. Analysts predict that Trump could push for a ceasefire in the Ukraine conflict, potentially easing geopolitical tensions.
In the Middle East, he has been vocal in his support for Israel and Saudi Arabia, and his policy on Iran may become even more assertive. Regarding China, while continuity is expected, Trump’s trade stance remains steadfast, potentially creating indirect opportunities for Indian industries as US-China trade relations stay strained.
Currency Implications and Rupee Volatility
The Indian rupee may experience downward pressure as the US dollar strengthens under Trump’s leadership. On Wednesday, the rupee closed at a record low of 84.28 per dollar. A stronger dollar could make Indian exports more competitive and increase import costs.
To manage the rupee’s volatility, the Reserve Bank of India (RBI) has maintained a significant foreign exchange reserve of $684.8 billion as of October 25. The RBI stands ready to use these reserves to stabilize the rupee in case of any adverse impacts from global market volatility, ensuring excellent stability in the domestic currency markets. Source: Livemint
A Potential Shift in the Dollar’s Strength
Trump has often favored a weaker dollar to boost American manufacturing competitiveness. For India, a weaker dollar could reduce export profits and potentially make the country less attractive for foreign investments.
While weakening the dollar could boost US manufacturing, it poses challenges, as a weaker dollar might drive inflation. Implementing this would be complex, involving a delicate balance between inflation control and supporting American industry. Such policies may have cascading effects on Indian trade, investment, and currency stability.
Conclusion
Donald Trump’s second term in office presents Indian investors with opportunities and challenges. With potential shifts in trade policies, the strengthening of India-US relations, and volatility in currency and crypto markets, Indian investors are likely to feel the ripple effects across multiple sectors.
As markets respond to these global changes, Indian investors can expect opportunities in diversified mutual funds, sectors aligned with manufacturing and export, and sectors poised for growth as trade between the two countries deepens.
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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.
