US Presidential Election 2024: What will be the impact on Indian IT stocks? Experts decode

US Presidential Election 2024: In the context of any event that occurs in the United States (US), Indian investors are usually quick to assess the future of the Information Technology (IT) sector as there is a strong connection between the Indian IT industry and the ONS .

Like the US presidential election 2024 approaches, investors assess the potential impacts on the IT sector. Market analysts are also considering the impact on the industry and India in the event of a Kamala Harris victory, as well as the impact if Donald Trump is re-elected. Other sectors that could be affected include automotive, energy, defense, raw materials and metals, and pharmaceuticals.

Indian IT companies are significantly affected by the US economy as they rely heavily on US customers. Major Indian IT players such as TCS, Infosys, Wipro, HCL technologiesAnd Tech Mahindra get more than half of their income from the US. Changes in the U.S. economy can have a direct impact on these companies’ revenues and growth opportunities. According to the India Brand Equity Foundation, the Indian IT and business services market is expected to reach $19.93 billion by 2025.

According to Arun Kejriwal, the founder of Kejriwal Research and Investment Services, the overall market will be affected, but the IT sector will be particularly affected by the way business in the US operates, which involves currency fluctuations; these factors will have a greater impact on IT compared to other sectors.

Would the impact of the 2024 US presidential elections be positive or negative for Indian IT stocks?

PhillipCapital noted in its latest report that the initial consequences appear to be more severe if Trump is elected, due to his anti-immigration policies. Nevertheless, Indian IT companies have tried to mitigate this risk by hiring more local staff in the local market, using subcontractors and setting up additional delivery centers near the coast.

On the other hand, Saurabh Patwa, head of research and portfolio manager at Quest Investment Advisors, pointed out that historically, the US elections have had little to no impact on the IT spending patterns of US companies. Thus, the election cycle is not expected to have any significant impact. changing the trajectory of the industry.

Overall, the outlook for Indian IT remains cautiously optimistic, driven by sectoral recovery and steady demand.

Political impact on India

Arun Kejriwal said the US elections will impact more than just the IT sector; What other factors do people take into account? Currently, the Democrats are in power, and the election results are too close to predict. It is uncertain whether the Democrats or the Republicans will emerge victorious. A number of important geopolitical issues are emerging with both candidates expressing anti-China sentiments at this time. Such stances toward China could benefit India by increasing export opportunities and promoting better relations. However, there is also some anti-Indian rhetoric, especially from Canada, which adds a layer of negativity. The political landscape is quite complicated and clarity will likely only emerge after the new president is in power.

China’s initiative to engage with India at the BRICS meeting underlines the problems of the Chinese economy, which is in poor shape. They need a significant market to buy their products. Currently, India is the only country that can consume Chinese production. It is uncertain whether India will fully reopen its market to China as it did five to eight years ago. If the country chooses to reopen, it will likely do so with many restrictions in place to rebuild trust between the two nations. This will not be based on blind faith. As we continue to manage our relationship with China, the US will inevitably seek to strengthen ties with India. At the same time, it has to sell defense equipment to India.

What does it indicate in the market? The market is unlikely to see a landslide victory from either side, and it doesn’t really matter who takes the lead – whoever it is. But depending on who intervenes and how they respond in India, the future circumstances will depend on that.

Outlook for the Indian IT sector

The results from the IT sector have largely met expectations so far. In the US, the BFSI sector is experiencing a recovery, characterized by an increase in volumes and a slow increase in discretionary spending. Conversely, in Europe, especially within the automotive and manufacturing sectors, challenges remain that impact the performance of various companies. Overall, organizations are navigating the difficult macroeconomic landscape, with demand stabilizing in key sectors, said Saurabh Patwa.

Positive indicators point to a stronger recovery in the IT sector in the coming quarters. The revival in the financial services sector, along with expected widespread growth in Q2FY25, is expected to improve performance in the second half of FY25 and beyond. The impressive results from the major US banks are promising, indicating a potential trickle-down effect that Indian IT services can benefit from as we move forward.

“While the industry could face margin pressure due to seasonal factors such as furloughs and wage increases, the declining interest rate cycle is likely to lead to a rise in discretionary spending, which will increase demand for IT,” Patwa said.

Disclaimer: The above views and recommendations are those of individual analysts, experts and brokerage firms, not Mint. We advise investors to contact certified experts before making an investment decision.