Written by Jaspreet Kalra
MUMBAI (Reuters) – Global investors are likely to find Indian financial markets relatively safe from the fallout from Donald Trump’s economic policies, including any protectionist trade policies that might spark volatility in emerging markets.
Trump’s decisive election victory last week and his imminent return to the White House next month have sparked uncertainty among investors.
However, investors and analysts say India’s strong economic growth, limited exposure to the Chinese and US consumer market, strong domestic appetite for stocks and a central bank dedicated to ensuring currency stability will boost the country’s appeal amid global anxiety.
Shares in Asia’s third-largest economy are also likely to find support from strong domestic buying due to Indian companies’ limited reliance on export earnings.
This is important because markets fear Trump will reintroduce “America First” policies, raising the specter of a global trade war.
China is on the front line, with the former president threatening to impose tariffs of 60% or more on all Chinese imports, which is likely to increase pressure on the world’s second-largest economy.
Tariffs imposed on China are expected to negatively impact export-oriented Asian economies, according to analysts at Société Générale, who say India is better placed than Korea and Taiwan to deal with the fallout.
“Without any major fiscal announcement, China is likely to face downward pressure from a Trump win,” said Sat Dohra, portfolio manager in Hong Kong and the Asian equities team at Janus Henderson Investors.
Some investors moved away from India to buy Chinese stocks last month, but “there may be a return to India in a faster-than-expected time frame” due to its safe haven status, Dohra said.
While foreign investors withdrew a record $11.2 billion from Indian stocks in October, purchases of stocks by domestic institutional investors rose to an all-time high of about $12.7 billion in the same month, limiting the decline in benchmark indices.
Domestic investors see India benefiting from the diversification of the supply chain of US companies, in sectors such as electronic manufacturing, chemicals and pharmaceuticals, said Trideep Bhattacharya, president and chief investment officer for equities at Edelweiss Mutual Fund.
India’s economic fortunes have also changed since the last Trump presidency when GDP was slower versus a robust pace of 8.2% in the last fiscal year ending March 2024.
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