📰How India Reacted to the Election

Hello. We’ll be breaking down how Indian markets responded to the re-election of President Trump last night, and then close with Gupshup, a round-up of the most important headlines.

BTW: If America has 12 official federal holidays, how many does India — with more than quadruple the population, and far more official languages and customs — have? (Answer at bottom)

Markets

Read here for an appendix on the above.

Analysis

Indian Equities Pop Upon Trump Win

The Nifty50 jumped 1.13 percent today, the largest single-day pop in a month after President Trump’s election victory was called. Indian markets were open during U.S. election vote counts, and both the NSE and BSE Sensex grew around 1 percent steadily throughout the night.

India’s currency hit a new low of 84.34 rupees/dollar, largely driven by a surge in demand for U.S. dollars: the dollar surged after the election, as investors expected a Republican-controlled White House and Senate to extend tax cuts.

Throughout the night, the Reserve Bank of India worked to keep the currency stable, accomplished by buying huge amounts of rupees using U.S. dollar reserves through rapid computer-automated interventions. Below is the USD-INR exchange rate chart from last night’s election.

Even after tepid earnings and foreign outflows over October, increased collaboration between a Trump and Modi government will likely boost earnings going into FY25. “Both this year, but also during [former President Trump’s] previous stay at the White House, he had essentially challenged the longstanding strong dollar mantra, because he prefers a weaker currency to help with exports and American economic activity," said Nikos Tzabouras, senior market specialist at Tradu to Reuters.

Reducing corporate tax rates particularly boosts service exports, such as IT, while the China+1 strategy will increasingly benefit the industrial sector. Other businesses are also likely to gain as tech operations shift to India over China. Further clarity is expected after the Federal Reserve concludes its meeting on interest rates at the end of this week, with a 25 bps rate cut widely anticipated. Additionally, Trump recently commented on India’s high tariffs, indicating he might respond with similar measures. This rhetoric, along with upcoming monetary policy decisions, may be making foreign investors cautious.

Commodities broadly declined as election results continued to roll in. Since oil is globally traded in dollars, a stronger dollar makes it more expensive, which tends to lower oil prices as demand may weaken. Gold initially rose amid uncertainty over election outcomes but began to fall as a Trump victory seemed more likely. Both gold and bonds are seen as safe-haven assets and typically show an inverse relationship with U.S. Treasury yields. As Treasury yields climbed, gold prices correspondingly dropped.

Macro

• RBI’s Governor Das says the rhetoric shift does not imply an immediate rate cut. He still sees significant upside risk to inflation plus a durable economy that can endure higher rates for longer. Das also disregarded spillover effects from the US election, seeing India as resilient and independent compared to other EM peers. He also plans on removing restrictions from certain lenders and is open to intervening in the FX market more if volatility continues. (Economic Times)  

• Indian festivals boosted automobile sales with eyes moving to the wedding season now. Dealers are still holding 75 days of automobile stock even after a 36 percent boost in October sales compared to 2023. Economists have found that 35 percent of all motor vehicle sales happen during the festival season but the upcoming 4.2 million weddings will also set the tone for how consumer spending continues to evolve. In particular, investors are looking at urban demand which has fallen faster than rural demand in the back half of this year. (BBG) 

• Post-Trump dollar surge causes Asian central banks to go on defense. Asian central banks were seen intervening as FX values dropped by 1 percent or more, marking extreme volatility. While the RBI was certainly intervening, state banks in China and the Indonesian Central Bank joined in on dollar selling to maintain the values of their currencies. FX authorities are not concerned with gradual devaluation but rather extremely volatile downward swings. (Nikkei)

Equities

• Tata Steel's profitability drops amid weak steel prices. Mills across Asia have been suffering as Chinese demand remains weak and their supply continues to flood the market. The Indian government considered tariffs as imports for metal grief by 43 percent but exports fell by 29 percent. The only silver lining is that Indian demand keeps growing, and Tata delivered 6 percent more y-o-y within the country itself. (Moneycontrol) 

• Swiggy’s $1.3 billion (₹113.2 billion) IPO will likely be lukewarm domestically. Gray market (primary selling) points to a weak open. The rich valuation will likely make foreign and even domestic funds balk at initially buying. Domestic retail traders are more likely to invest given the household omnipotence Swiggy has now. (The Hindu)

Alts

• Bangladesh devises a dynamic payment plan to cover Adani’s charges. The country will likely provide a payment plan and further letters of credit on Thursday to extend payment terms. Both sides are unhappy with the mainstream coverage as it highlights Adani Group’s difficulties navigating abroad business and Bangladesh’s more severe financial situation, both of which can impact investor rationale. (BBG)

• KKR is looking to sell a $750 million (₹63 billion) stake in JB Pharma. JB produces a range of pharmaceuticals in diabetes, hypertension, and dermatology to export to 40 different countries. The company trades at $3.5 billion (₹294 billion) and KKR owns around 54 percent right now and is looking to limit its controlling stake. (CNBC)  

• Deutsche Bank increased its regulatory capital for lending by 33 percent to $3.56 billion (₹300 billion). Overall, the bank is looking to expand lending, investment banking, and private banking in the country. Overall, Deutsche has increased capital in the country by 3x in the last 10 years to benefit from growing market segments. Competition in the country for lending has increased with various European, American, and Japanese lenders increasing their share. (Deutsche Bank) 

• India’s state-owned coal giant, NTPC, approves $9.5 billion (₹798 billion) worth of new coal projects. The latest investment approval is for 6.4 gigawatts of electricity generation across 3 locations where the company already operates power stations. While India has been signaling a shift to cleaner energy, the growth demands are causing the public and private sectors to double down on coal demand. (BBG)

Policy

• Modi speaks to Trump within 24 hours of his re-election, solidifying strong U.S.-India relations ahead. Modi and Trump were generally seen as having a strong personal rapport during Trump’s first term, but this had a negligible impact on direct policy toward India.

• Myanmar ethnic groups fighting the junta are talking to India while the junta leaders are speaking with China. The ethnic minister said India is reaching out to key groups in Myanmar (though the government refused to comment) regarding some of the ethnic armies and NUG. (BBG)

• Modi and Foreign Minister Jaishankar condemned attacks on Hindu temples in Canada. Modi has refrained from commenting on the evolving diplomatic issue but broke news regarding the November 3rd violence in Ontario. Both Indian leaders saw it as a clear attempt to intimidate diplomats returning to Canada. The Indian High Commission of Ottawa also condemned the attack, though the Canadian government has not confirmed any suspects or next moves. (Economic Times)

Oh, and India has three official federal holidays. That’s it. They’re Republic Day, Independence Day, and Gandhi Jayanti.

See you Friday.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

1 USD = 84.2 Indian Rupee