It’s a special day today as Donald Trump becomes the 47th President of the United States. It’s crucial to understand that US presidents have often changed the course of history, whether it was Nixon in 1971 or the leaders who joined World War II with the Allied forces. A significant amount of history-changing events have happened whenever a new president has come into office, and this one, in particular, could be a path-changing moment for both the US markets and the rest of the world. We don’t know exactly what will happen over the next four years, but this presidency could bring about some big decisions that alter the current course of how the world operates.
So, in today’s Daily Bite, we’ll discuss whether Trump’s win is likely to favor the Indian markets. What are the experts saying, and what could this mean for India? Will it be positive or negative for Indian markets?
Where is the market headed?
Market Overview
So far, the markets, in their own wisdom, have responded positively to the Trump Presidency—up 1.12%. The day started with a gap-up, then came back to close the gap from the morning, before pushing higher. This is very positive price action, where the recent gap has been filled, and the markets closed well above the two-day high. This signals that the likelihood of a rally from here is much higher than what we were expecting in recent days. The Nifty gained 1.12%,
Nifty Next 50
Nifty Next 50 rose by a sharp 2.28%. After eight days of consolidation, this index has broken out, although the mid-term trend is still down, with lower lows. Still, the current pivot breakout is very encouraging, and the Nifty Next 50’s 2.28% gain is a positive sign.
Nifty Mid and Small Cap
Mid-caps also broke out of their recent consolidation, rising by 2.09%, and small caps surged 1.88%, almost reaching their moving average—much ahead of all other charts, now more than 1200 points above the recent bottom. Small caps have rallied much faster and stronger than the rest of the market.
Nifty Bank Overview
However, Bank Nifty was subdued, with only a 0.21% gain. This could be due to the sharp rise in yields overnight, making lower interest rates seem less likely, and bank stocks will likely rally once there’s an indication of rate cuts in India.
Advanced Declined Ratio Trends
The RBI Governor’s recent remarks about not seeing any slowdown in the Indian economy suggest that interest rate cuts are not on the cards, which could explain why Bank Nifty was muted today. The advance/decline ratio was strong at 427 advances to 72 declines, signaling a broad shift towards the green. On the previous session, there was some FII selling to the tune of 2500 crores, but DIIs bought nearly 3000 crores. The FII data for today, which will come out later in the day, will be important to watch. Will funds flow out of India due to the US election, or will they move in? The Indian Rupee hit a new low today, touching 84.28, and the Chinese Yuan also weakened. This could signal further outflows, but it’s still uncertain.
Many were surprised to see Indian markets rise despite Trump’s victory, as some experts believe this win could lead to FII outflows as investors return to the US, buoyed by optimism about the new presidency.
Nifty Heatmap
In the stock markets, tech stocks boomed, with TCS and Infosys rising 4%. Other tech companies like HCL Tech, Wipro Tech, and Mahindra also performed well, benefiting from US market optimism, with Dow Jones futures up nearly 1100 points. These tech firms serve the US market, so the optimism there has translated into gains here.
There were also other pockets of green, including stocks like L&T, Reliance, Britannia, Adani, Adani Ports, and Bharat Electronics, while stocks like Titan, HDFC Life, and SBI Life saw minor declines. In the Nifty Next 50, stocks like DLF, Hebel, and Zomato (on news of its IPO) saw strong gains, with Zomato up 5%. Gas Authority surged 6%, and Adani Green rose 4.6%, with energy stocks continuing to see bullish moves. Public sector enterprise stocks like HAL, IOC, and others also performed well.
Sectoral Overview
In terms of sectoral performance, IT was the standout performer, up 4% in a single day. It made a remarkable U-turn from the recent bashing and has now wiped out all the losses for the past week and month, making it the top gainer over the last three months. Real estate also bounced back strongly, up 2.6%. Commodities, public sector enterprises, infrastructure, energy, and metal stocks also saw strong gains. However, FMCG was the only sector in the red, down by 1.7%. Private banks, as mentioned earlier, were muted
Sectors of the Day
Nifty Metal Index
IT stocks rebounded, including Persistent, L&T Tech, LTI, Mindtree, TCS, Infosys, and Coforge. The IT index is showing good recovery from its support zone.
Stock of the Day
IFCI
Stock spotlight today was on IFCI, which surged 13%. Public sector enterprise stocks had a strong comeback today, proving that you can’t always predict market moves, and surprises are common. It’s important to follow the market trend without fighting it, even when things seem counterintuitive.
Story of the Day
Now, turning back to the Trump win. It’s been an amazing result, and I personally believed for a long time that Trump would win this election. I thought this might be a vote for change, as inflation has really hit the US hard. Whether they report it at 3% or 4%, people in the US I’ve spoken with have said inflation has deeply hurt them. There’s a widespread desire for change because the current debt-driven economy can’t continue indefinitely. Trump now faces a huge challenge, and while he’s already promised to reduce the debt and cut tax rates, it’s a monumental task to turn around the current financial situation. In just the last month alone, nearly $490 billion of new debt has been issued, pushing the total debt to around $33 trillion, which could reach $40 trillion in a year. This is unsustainable and will continue fueling inflation, preventing interest rates from coming down. Eventually, some part of the market is likely to break under this pressure.
Advantages of a Trump Win for India
Let’s look at some potential advantages for India, sourced from Economic Times. A Trump win could lead to a boost for Indian exports, especially in sectors like auto ancillaries, solar panels, chemicals, etc., as he may impose a 40% tariff on Chinese imports. As Chinese growth slows and their exports are reduced, commodity prices could decrease, benefiting India, which imports many commodities. Additionally, Trump’s focus on US manufacturing could benefit Indian industrial and defense companies through increased exports. His pro-business stance could create a more favorable climate for Indian equities, especially given his good relationship with India’s Prime Minister. A pro-business environment with lower taxes and reduced regulations could benefit Indian markets.
Disadvantages of a Trump Win for India
On the flip side, there are some potential downsides. Higher interest rates in the US, coupled with tariffs, could lead to inflationary pressure and export problems. A stronger dollar could weaken the Indian Rupee, raising import costs and adding to inflation. There’s also uncertainty around Trump’s policies, as he has a more volatile personality compared to other presidents, which could lead to market volatility. Immigration policies, especially with regard to Indian IT services, could be another point of concern, as Trump has been vocal about tightening immigration. Moreover, tariffs could impact industries like pharma and textiles that rely on exports to the US. The rising US deficit could also lead to global inflation, increasing interest costs and affecting emerging markets like India.
It’s clear that while we may feel detached from what happens in the US, the reality is that the US and its president have an outsized influence on the global economy. Their actions can truly alter the course of global markets.
Looking at historical data from Charlie Bellelo, we see that most US presidents have overseen strong stock market performance. Trump, in his previous term, saw an 83% return in the S&P 500, suggesting that the market may do well under his second presidency.
What should you do now?
Volatility is a short-term or at most medium-term phenomenon. However, markets have generally been kind to those who maintain a long-term view, especially in India. The Indian market has shown resilience in weathering volatility over time. Even if we face some volatility due to tariffs, currency movements, or other factors, it’s important to ride through it. In the end, patience could reward investors handsomely.
