By Jaspreet Kalra
MUMBAI (Reuters) – Global investors are likely to find relative safety in India’s financial markets from the spillover of Donald Trump’s economic policies, including from any protectionist trade policies that could spark emerging market volatility.
Trump’s decisive election victory last week and his impending return to the White House next month has raised significant uncertainty for investors.
However, India’s strong economic growth, limited exposure to Chinese and the U.S. consumer market, robust local appetite for equities and a central bank devoted to ensuring currency stability will bolster the country’s appeal amid global unease, investors and analysts say.
Stocks in Asia’s third-largest economy are also likely to find support from strong domestic buying due to Indian companies’ limited reliance on export revenues.
That’s significant as markets fear Trump will reintroduce his ‘America First’ policies, raising the spectre of a global trade war.
China is at the frontline of risk as the former president has threatened tariffs of 60% or more on all Chinese imports, which is likely to heap more pressure on the world’s second-biggest economy.
Tariffs on China are expected to negatively impact export-oriented Asian economies, according to analysts at Societe Generale, who see India as better positioned than Korea and Taiwan to cope with the fallout.
“Without any major fiscal announcement, China is likely to face downward pressure from Trump’s victory,” said Sat Duhra, a Hong Kong based portfolio manager on the Asia (ex-Japan) equity team at Janus Henderson Investors.
Some investors had pivoted away from India to buy Chinese stocks last month but “there could be a reversion back to India in a quicker than expected time frame” because of its status as a safe haven, Duhra said.
While foreign investors pulled out a record $11.2 billion from Indian equities in October, domestic institutional investors’ stock purchases rose to an all-time high of about $12.7 billion in the same month, limiting the benchmark indexes’ fall.
Domestic investors see India benefiting from supply chain diversification of U.S. companies, in sectors like 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 shifted since the last Trump presidency when GDP was slower versus a robust 8.2% pace in the most recent financial year ended March 2024.