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 any protectionist trade policies that could fuel emerging market volatility.
Trump’s decisive election victory last week and his impending return to the White House next month have created great uncertainty among investors.
India’s strong economic growth, limited exposure to Chinese and US consumer markets, robust local interest in equities and a central bank committed to ensuring currency stability will strengthen the country’s appeal amid global turmoil, say investors and analysts.
Stocks in Asia’s third-largest economy are also likely to find support from strong domestic buying, given Indian companies’ limited dependence on export revenues.
That’s important as markets fear Trump will reintroduce his “America First” policies, raising the specter of a global trade war.
China is on the front lines of the risk as the former president has threatened tariffs of 60% or more on all Chinese imports, likely putting more pressure on the world’s second-largest economy.
The tariffs on China are expected to have a negative impact on export-oriented Asian economies, according to analysts at Societe Generale, who see India as better positioned than Korea and Taiwan to absorb the fallout.
“Without any major budget announcement, China is likely to face downward pressure from Trump’s victory,” said Sat Duhra, a Hong Kong-based portfolio manager of Janus Henderson Investors’ Asia (ex-Japan) equity team.
Some investors had left India last month to buy Chinese stocks, but “there could be a return to India in a quicker-than-expected time frame” due to India’s safe-haven status, Duhra said.
While foreign investors pulled a record $11.2 billion out of Indian equities in October, share purchases by domestic institutional investors rose to a record high of around $12.7 billion in the same month, limiting the decline in benchmark indices.
Domestic investors see India benefiting from U.S. companies’ supply chain diversification 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 Trump’s last presidency, when GDP slowed from a robust pace of 8.2% in the most recent financial year ending March 2024.
