US Election Results: Trump Or Harris — Who Does Indian Stock Market Prefer?

India’s financial markets are closely monitoring the US election results, with investors focused on the potential impact on stocks. At the time of writing, Republican candidate Donald Trump was leading in swing states like Pennsylvania, Wisconsin, Georgia and North Carolina, while his Democratic opponent, Kamala Harris, secured an early lead in Arizona. With key states like Nevada still undecided, the outcome remains uncertain, heightening market tension.

Though the US election has no direct link to Indian markets, changes in US economic and trade policies often influence India’s financial landscape. As such, for Indian investors, the outcome could have significant implications. 

Trump’s policies have historically supported aggressive economic actions, which may align with market expectations for higher returns. On the other hand, Harris represents a shift toward stability and regulatory consistency, offering a different type of reassurance to markets.

First, when it comes to the IT sector, given that Indian IT companies rely heavily on US clients, changes in visa policies, corporate taxes and dollar strength could impact their revenues.

• H-1B visa policies: Stricter H-1B visa rules under Trump previously raised denial rates for Indian tech talent, affecting on-site work. But recent years have seen Indian companies reduce reliance on these visas, focusing on building local workforces in the US.

• Corporate taxes: A Republican win could favour lower corporate taxes, boosting profits and IT budgets for US clients. In contrast, Democrats aim to raise corporate tax rates, potentially tightening client budgets.

• Federal Reserve policy: A Trump presidency could mean more aggressive Fed actions, potentially increasing interest rates and affecting IT client budgets. A Democratic win may maintain a stable rate approach, providing more spending room for tech clients.

Ace investor Ramesh Damani has offered a cautionary perspective on the market’s preference for Donald Trump’s victory. While many Indian investors are hopeful about Trump, Damani warns that this optimism might be misplaced, citing Trump’s “very inward and unsecular view of America's role,”

 “On balance, I would prefer Kamala Harris,” Damani said.

Despite the current market volatility, Damani remains positive about India’s economic outlook, explaining that the market's recent dip is due to fatigue from sustained growth rather than external pressures like the US election.

Safiya Ghori Ahmad, VP of the Finance Committee for the Harris Campaign, highlighted that a Free Trade Agreement (FTA) between the US and India is unlikely under either presidential administration. “On FTA, it’s going to be difficult for either parties given that the Congress is likely in no mood for passing free trade agreements with any country regardless of India or not,” Ahmad told NDTV.

She noted that while Trump’s previous administration focused on reducing trade deficits, Prime Minister Narendra Modi’s emphasis on manufacturing could create opportunities for US companies to invest in India, given that “US, China relationship has been so fraught.”

Despite this, Ahmad believes there will be no immediate push for an FTA.

Vinod Nair, Head of Research at Geojit Financial Services, emphasised the importance of diversification in portfolios, particularly during periods of heightened volatility. “We believed that each of these categories offered strong investment opportunities and also strengthened the portfolio in case of a hike in volatility," Nair said, advising retail investors to allocate across multiple asset classes such as equities, bonds, gold and cash.

Kamala Harris in the White House could bring greater continuity and stability to the India-US relationship, according to Prof. Irfan Nooruddin, from Georgetown University. He told NDTV that the Trump administration has always been a “wildcard” in global politics, making “his reputation on being unpredictable and shaking up the status quo.”

Prof. Nooruddin points out that India remains a “bulwark” against China, and Trump's rhetoric on this front is likely to continue. He added that the good relationship between Trump and Prime Minister Narendra Modi at personal level could help in unlocking certain advantages.

In contrast, Prof. Nooruddin predicted more continuity under Kamala Harris. "A lot of the key figures will rotate of course, but you will see a deep bench on the Democratic side, including many people who have pedigree in the Obama Administration and the Biden Administration and who are very committed to the India relationship," he told NDTV

According to G Chokkalingam, founder of Equinomics Research & Advisory, the US election results are unlikely to have a long-term impact on the Indian stock market.

"If Trump wins the market would be steady a couple of days in the short term. If Kamala Harris comes to power, the market may fall one or two days, but let me tell you, after a week everybody will forget the elections, the way we forget state elections within a week," he told NDTV.

Chokkalingam said that no matter which way the election results go, there won't be any major change. "For India, we don't have many options, we don't have many opportunities because we export more than 100 million dollars in terms of goods and IT services to the US. So, whatever happens, finally the balancing would happen," he said.