Donald Trump’s second term: What it means for India’s economy and stock market investors | Stock Market News

As the world prepares for Donald Trump’s second term as US President, there are growing apprehensions that his policies on trade, immigration, and climate change could profoundly impact the global economic landscape.

Donald Trump is set to take office on Monday, January 20.

The United States, as the world’s largest economy and a leading military power, has a significant influence over global economic growth and peace efforts. It is easy to understand the importance of the Trump administration’s policies for the global economy and markets.

Trump’s second term: What it means for the Indian stock market?

Trump’s policies are expected to be relatively expansionary, potentially leading to higher inflation. As the US Federal Reserve has stated that it will remain data-dependent while deciding the trajectory of interest rates, higher inflation could mark the end of the monetary easing cycle in the US. This, in turn, could drive up bond yields and strengthen the US dollar, a key negative for emerging markets like India.

Besides influencing the interest rate trajectory, Trump’s arrival should be viewed in a broader context, as his policies will shape the Asian economy.

Trump has threatened higher tariffs on several countries, including India. His immigration policies could also impact the Indian tech sector. However, experts do not appear concerned about the “Trump factor.”

Some believe a second Trump term could offer new opportunities for India as his policies are expected to trigger a reallocation of trade and investment flows away from China. 

However, Trump’s second term could also mean tough days for export-driven economies.

According to Ross Maxwell, Global Strategy Operations Lead at VT Markets, a second Trump administration could significantly reshape Asia’s economic landscape, mainly through trade policies and protectionism.

Maxwell believes if the Trump administration prioritises American interests with tariffs and trade agreements, countries like China, Japan, South Korea, and Vietnam could face significant challenges as they rely heavily on US trade.

“Trump’s decoupling from China could lead to shifts in production and sourcing strategies, with Southeast Asia—especially Indonesia, Malaysia, and Thailand—potentially benefiting from increased foreign investment as companies diversify their supply chains,” said Maxwell.

On the other hand, Maxwell believes countries like India, Vietnam, and Indonesia may gain as companies shift operations from China to take advantage of lower costs.

“India, as a growing manufacturing hub, could see accelerated growth if trade barriers with China persist. However, nations like China and Japan—highly dependent on US exports—may struggle under continued tariffs and protectionist measures,” said Maxwell.

Moreover, Trump’s immigration policies could significantly impact Asia’s tech sector. Maxwell underscored that stricter US immigration laws could mean more tech talent staying in Asia, boosting regional innovation hubs in countries like India, Singapore, and South Korea. This shift may also benefit fintech companies.

Investing in the Trump era

Experts expect Asia’s economies to face volatility due to Trump’s trade wars and tariffs, but some sectors—such as tech and defence could thrive.

“With a risk-on sentiment emerging, investors may turn to higher-reward opportunities like smaller fintech startups and the growing crypto market while avoiding sectors exposed to tariffs and global trade disruptions,” said Maxwell.

According to Arindam Mandal, Head of Global Equities at Marcellus Investment Managers, the “China + 1” strategy will likely persist under Trump and favour export-driven sectors.

“Indian IT firms have already seen gains, and this trend could extend to other export-oriented cyclical industries,” said Mandal.

Manish Chowdhury, the head of research at StoxBox, believes that any policy change would be gradual and should help cool elevated bond yields and the dollar index.

“Emerging economies such as India would benefit from the reversal of the FII outflow, and investors should build positions in high-quality stocks with reasonably comfortable valuations from a medium to long-term perspective,” said Chowdhury.

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