Global investors are increasingly turning to India’s financial markets for stability, as concerns grow over the potential impact of Donald Trump’s economic policies on emerging markets. With his recent election victory and return to the White House next month, investors are facing significant uncertainty.
India’s Resilience in a Volatile Global Landscape
Despite global unease, India’s strong economic growth, limited exposure to Chinese and U.S. consumer markets, and a central bank committed to currency stability are expected to make the country a more attractive destination for investment. Additionally, India’s domestic market is set to support stock prices, with local demand for equities remaining robust.
Indian stocks are less reliant on export revenues, which puts the country in a stronger position than many other Asian economies. This is crucial as markets fear Trump will revive his “America First” policies, potentially leading to a global trade war.
India Outperforms Other Asian Economies
China is most at risk from Trump’s policies, with the former president threatening to impose tariffs of up to 60% on all Chinese imports. This could place additional pressure on China, the world’s second-largest economy, and create challenges for export-oriented Asian countries.
Analysts at Societe Generale believe India is better positioned than economies like Korea and Taiwan to withstand the impact of Trump’s policies. Sat Duhra, a portfolio manager at Janus Henderson Investors, added that without significant fiscal changes, China could face continued economic pressure from Trump’s victory.
Shifting Investor Sentiment
In the past, some investors moved away from India to focus on Chinese stocks. However, Duhra suggests that there may soon be a return to India, as the country is increasingly viewed as a safe haven amid global volatility.
While foreign investors pulled a record $11.2 billion from Indian equities in October, domestic institutional investors made up for the shortfall. Their purchases of Indian stocks reached an all-time high of approximately $12.7 billion in the same month, helping to stabilize the country’s benchmark indexes.
India’s Economic Outlook
Domestic investors are optimistic about India’s role in the supply chain diversification strategies of U.S. companies. Sectors like electronics manufacturing, chemicals, and pharmaceuticals are expected to benefit, according to Trideep Bhattacharya, president and CIO for equities at Edelweiss Mutual Fund.
India’s economic performance has also improved significantly since Trump’s last presidency. GDP growth reached a strong 8.2% in the financial year ending March 2024, compared to a slower pace during his previous term. This shift highlights India’s growing resilience and potential as a stable investment option in a volatile global market.
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