Kamala Harris Vs Donald Trump: How US Elections Will Impact Sectors In India? Find Out!

US Elections 2024: Whatever may be the verdict, the relationship with the United States will only grow, said EAM S Jaishankar. India's external affairs minister's statement comes when the United States is holding an election for a presidential seat on November 5, 2024. Kamala Harris from Democrats and also the successor of current President Joe Biden from the party is competing against the Republican party's Donald Trump who was once a former president. Who will win? Kamala and Trump both are in an intense rivalry, as per the poll numbers. That being said, let's have a look at the sectors in India who will be impacted by the US elections.

Amidst the US election, Jaishankar said in a conference that India has seen steady progress in its relationship with the US over the last five presidencies, including a previous Trump presidency. Hence, Jaishankar stated that looking back at the American election, they are confident that irrespective of the outcomes, India's relationship with the US will continue to grow.

This 2024 US election is the 60th quadrennial U.S. presidential election, and also the first presidential election under the electoral vote distribution determined by the 2020 census.

Presidential electors who will elect the President and Vice President of the United States will be chosen; a simple majority (270) of the 538 electoral votes is required to win the election, as per Wikipedia.

Here's how the US election will impact various sectors in India as per JM Financial:

Banks and NBFCs:

As per JM Financial, a win of the democrat would imply a down in India. This would be positive for NBFCs (NBFCs had rallied earlier in Jul'24 to Sep'24 in anticipation of a rate cut by the Fed).

Due to recent correction, stocks are reasonably valued while the underlying argument of fixed rate asset books well-placed in a declining rate cycle still holds. Within the banking space, sharp rate cuts should see NIM compression for the sector as a whole (large private banks to be relatively better placed).

Meanwhile, a Trump win could result in a tighter interest rate regime in the US (and thus a stronger USD), which could keep RBI on the back foot w.r.t to interest rate cuts. This could ensure interest rates in India do not come down in a hurry and hence the expectation of NBFCs outperforming banks may not hold. PSU Banks could be relatively beneficiaries here given recent correction and palatable valuations.

2. Insurance:

The Democrats staying in power implies sharper rate cuts, which will be good for life insurers. A Republican outcome could be negative at the margin for Insurance companies.

3. IT Services:

In his previous regime, Trump initiated curbing the H-1B visa programme. His policies led to increased H-1B rejection rates, higher H-1B/L-1 visa processing charges and wage inflation for H-1B resources. Similar policy stance can't be ruled out in his second term, if he wins.

Notably, JM's note said, Indian IT Services players are more insulated now from such anti-immigration policies than they were in 2016. All players have ramped up local hiring in the US. The majority of their US employees are now not dependent on visas (local/green card holders). The impact of such policies on players' ability to deliver service or impact on margins due to cost inflation etc. could therefore be limited.

4. Pharmaceuticals:

Biden-Harris let Medicare directly negotiate prices of select prescription drugs (takes effect from 2026). Medicare's ability to negotiate is limited to certain high expenditure (at present 10 drugs) single source drugs (without generics/ biosimilar competition). Lower drug prices due to this negotiation could be negative for innovator companies. Prima facie this is neutral for Indian generic companies.

Many Republicans want to repeal this. However, the Trump administration has remained discreet about their plans. Harris has mentioned that she would like to accelerate the speed of negotiations. This could result in an extended list of drugs up for negotiation.

Democrats have increased the population pool eligible for subsidised health insurance as well as the size of subsidies under the Affordable Care Act (ACA). These 'enhanced subsidies' are set to expire in 2025. Republicans, on the other hand, have not been forthcoming on their plans for the ACA. However, many have stated these benefits should expire, which is negative for the overall healthcare space. A Harris administration would like to make these subsidies permanent, which can be a neutral-positive event for the overall healthcare space.

5. Automobile & Ancillary:

If Trump wins and raises tariff on China imports would mean China+1 de-risking can accelerate and may benefit Indian auto ancillary companies in terms of higher exports. However, protectionist policies by Trump might require Indian companies to invest in US to localise supplies, which were otherwise exported from India.

6. Oil & Gas:

It is pointed out that Trump's pro oil & gas policies could be a bit bearish for global oil price as it could incentivise investment in US shale assets. He has promised to end Russia-Ukraine war and Middle East tension could eliminate geopolitical risk premium from oil price.

Also, Trump's likely approval for new US LNG export plant could lead to normalisation of spot LNG prices from current high levels.

7. Chemicals:

Higher tariffs on Chinese imports under Trump could result in higher competitiveness of Indian chemicals exporters. Hence, despite the imposition of 10-20% tariffs on Indian imports, chemical exports from India could see a meaningful jump, as per the brokerage.

8. Textiles:

A stronger US economy under Trump could improve retail sentiment and potential imports of apparel from India.

9. Tiles:

Morbi players have exposure to USA and, hence, if Trump wins they could benefit from higher duties on China. Higher exports from Morbi could help improve domestic volume growth and realisations for domestic focussed tile brands.

10. Wires & Cables:

Higher tariff on Chinese wire and cables companies could also benefit domestic exporters of wires & cables to the US.

During US election 2024, both President and Vice President will be elected.