Donald Trump elected 45th US President: Top five takeaways for Indian stock market
Polls in the US had suggested an edge for Clinton, but Trump pipped her in a close race. To gain a majority, a candidate needs to secure a minimum of 270 votes.
By Kshitij Anand, ETMarkets.com | Updated:
NEW DELHI: America has given its verdict. Donald Trump has become the 45th President of United State of America, defeating Hillary Clinton.
Various opinion polls in the US had suggested an edge for Democrat Hillary Clinton, but Donald Trump pipped her in a close race. To gain a majority, a candidate needs to secure a minimum of 270 votes.
Donald Trump might have already made many traders unhappy across the globe, who had gone long on stocks ahead of the presidential election verdict, hoping for Hillary Clinton to win.
Going by the buzz on Dalal Street, here are top five takeaways for the domestic stock market from the US presidential election.
No long-term impact: Donald Trump, the 45th US President, was not a favoured candidate for markets, not just for India but across the globe. Hence, a kneejerk reaction is warranted. However, it will not spoil the long-term story for the Indian market, which is still in a sweet spot.
Vinod Nair, Head of Research, Geojit BNP Paribas, told ETMarkets.com that there would be no long-term impact on the Indian market. “One reason for that is that the institutional structure of the US is much above any personal view, and thus not big sectoral impact is expected in India,” he said.
A kneejerk reaction of 100- to 200-odd points on the Nifty50 cannot be ruled out, and that is something the market already was on Wednesday. But the outcome will not destroy the long-term story for the India market.
“The domestic market will eventually settle down after this knee-jerk reaction. Then it will trade in the lower zone between 8,400 and 8,500 levels for some time,” Vijay Singhania, Founder-Director, Trade Smart Online, told ETMarkets.com.
Impact on pharma sector: Indian pharma companies, especially the ones with significant exposure to the US market, could see some rub-off effect. An uncertain regulatory environment is likely to cause more damage to the generics market.
Both presidential candidates are in favour of allowing the US government’s Medicare programme which accounts for about 20 per cent of the total US drug spend.
Under the programme, the government would directly negotiate drug prices with manufacturers, which could spell trouble for companies producing generics. “Like Clinton and Sanders, Trump would require greater price transparency, and would reduce import restrictions on foreign and generic drugs, and would leverage Medicare to negotiate down drug prices,” Raghu Kumar, Director, Upstox, told ETMarkets.com.
“Trump can cause a serious headache for the entire pharma industry, the generic segment in particular, if he decides to legislate laws to bring back patent regime in America, potentially creating a huge loss of opportunities in selling generics to the high margin US market,” Jimeet Modi, CEO, SAMCO Securities, told ETMarkets.com.
Indian pharma companies will not be able to command higher earnings multiples in a Trump regime.
US-sensitive stocks in focus: India companies with substantial meaningful exposure to the US market would come into focus. Morgan Stanley has handpicked 11 stocks which are US-sensitive under two categories – high beta and low beta.
Among the high-beta stocks are names like Tata Motors and Bharat Forge. In the low beta bracket, there are US sensitive names such as Wipro, Glenmark pharma, HCL Technologies, RIL, TCS, Lupin, Infosys, UPL and Tech Mahindra.
“Investors should watch out for stocks in tourism and pharma sectors, specially Sun pharma, Lupin and Cipla,” Abnish Kumar, Director & Research Head, Amrapali Aadya Trading & Investment, told ETMarkets.com.
Impact on rupee: High volatility is expected in the currency market not just for the rupee, but also other currencies across the globe. “The impact is vastly uncertain – both in short as well as medium term. The dollar will initially sink against the currencies of developed countries, such as the UK, Japan and Switzerland — if Trump edges the contest,” said Kumar of Upstox.
“The greenback will also probably fall against the euro, the second most important global currency. But some think the dollar could strengthen against currencies of the developing markets – such as the Mexican peso – due to anticipation that Trump will push through new protectionist trade policies, which will damage their economies,” he said.
Impact on IT sector: The immigration issue dominated most part of Trump's campaign. He said he would bring back jobs from India and stop the high-skilled H-1B visa program.
“He was against the current IT companies’ trade deal with the US. Hence, his victory may trigger significant disruption in the IT sector,” Abnish Kumar, Director & Research Head, Amrapali Aadya Trading &Investment, told ETMarkets.com.
Various opinion polls in the US had suggested an edge for Democrat Hillary Clinton, but Donald Trump pipped her in a close race. To gain a majority, a candidate needs to secure a minimum of 270 votes.
Donald Trump might have already made many traders unhappy across the globe, who had gone long on stocks ahead of the presidential election verdict, hoping for Hillary Clinton to win.
Going by the buzz on Dalal Street, here are top five takeaways for the domestic stock market from the US presidential election.
No long-term impact: Donald Trump, the 45th US President, was not a favoured candidate for markets, not just for India but across the globe. Hence, a kneejerk reaction is warranted. However, it will not spoil the long-term story for the Indian market, which is still in a sweet spot.
Vinod Nair, Head of Research, Geojit BNP Paribas, told ETMarkets.com that there would be no long-term impact on the Indian market. “One reason for that is that the institutional structure of the US is much above any personal view, and thus not big sectoral impact is expected in India,” he said.
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A kneejerk reaction of 100- to 200-odd points on the Nifty50 cannot be ruled out, and that is something the market already was on Wednesday. But the outcome will not destroy the long-term story for the India market.
“The domestic market will eventually settle down after this knee-jerk reaction. Then it will trade in the lower zone between 8,400 and 8,500 levels for some time,” Vijay Singhania, Founder-Director, Trade Smart Online, told ETMarkets.com.
Impact on pharma sector: Indian pharma companies, especially the ones with significant exposure to the US market, could see some rub-off effect. An uncertain regulatory environment is likely to cause more damage to the generics market.
Both presidential candidates are in favour of allowing the US government’s Medicare programme which accounts for about 20 per cent of the total US drug spend.
ADVERTISEMENT
Under the programme, the government would directly negotiate drug prices with manufacturers, which could spell trouble for companies producing generics. “Like Clinton and Sanders, Trump would require greater price transparency, and would reduce import restrictions on foreign and generic drugs, and would leverage Medicare to negotiate down drug prices,” Raghu Kumar, Director, Upstox, told ETMarkets.com.
“Trump can cause a serious headache for the entire pharma industry, the generic segment in particular, if he decides to legislate laws to bring back patent regime in America, potentially creating a huge loss of opportunities in selling generics to the high margin US market,” Jimeet Modi, CEO, SAMCO Securities, told ETMarkets.com.
ADVERTISEMENT
Indian pharma companies will not be able to command higher earnings multiples in a Trump regime.
US-sensitive stocks in focus: India companies with substantial meaningful exposure to the US market would come into focus. Morgan Stanley has handpicked 11 stocks which are US-sensitive under two categories – high beta and low beta.
Among the high-beta stocks are names like Tata Motors and Bharat Forge. In the low beta bracket, there are US sensitive names such as Wipro, Glenmark pharma, HCL Technologies, RIL, TCS, Lupin, Infosys, UPL and Tech Mahindra.
“Investors should watch out for stocks in tourism and pharma sectors, specially Sun pharma, Lupin and Cipla,” Abnish Kumar, Director & Research Head, Amrapali Aadya Trading & Investment, told ETMarkets.com.
Impact on rupee: High volatility is expected in the currency market not just for the rupee, but also other currencies across the globe. “The impact is vastly uncertain – both in short as well as medium term. The dollar will initially sink against the currencies of developed countries, such as the UK, Japan and Switzerland — if Trump edges the contest,” said Kumar of Upstox.
“The greenback will also probably fall against the euro, the second most important global currency. But some think the dollar could strengthen against currencies of the developing markets – such as the Mexican peso – due to anticipation that Trump will push through new protectionist trade policies, which will damage their economies,” he said.
Impact on IT sector: The immigration issue dominated most part of Trump's campaign. He said he would bring back jobs from India and stop the high-skilled H-1B visa program.
“He was against the current IT companies’ trade deal with the US. Hence, his victory may trigger significant disruption in the IT sector,” Abnish Kumar, Director & Research Head, Amrapali Aadya Trading &Investment, told ETMarkets.com.
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