Donald Trump’s Republican Party has suffered major reverses in the US midterm elections and Democrats have secured a majority in both the Senate and the House of Representatives. This outcome could impact markets worldwide, including India. The dollar, US bond yields, crude oil, and foreign investment could change direction.
If the Republican defeat leads to a quick solution of the fountainhead problem of the West Asia crisis arising out of the US-Iran war, it could lead to a positive impact on the prices of crude oil, value of the rupee and FPI investment in the stock market in India, (Picture Credit: Getty Images)
Kolkata: President Donald Trump’s Republican Party has suffered a major setback in the US midterm elections with the Democrats securing control of both houses of the US Parliament, the Senate and the House of Representatives. This result will make it difficult for Trump to implement his policies in the remaining two years of his term. Its impact could be felt from the US economy to global markets. This election is also significant for India in many ways, as many factors such as crude oil, the dollar, gold and silver and foreign investment could be significantly influenced by US policies. Following the election results, the dollar and US bond yields have declined. At the same time, there are signs of strengthening of the rupee and buying by foreign investors. The question is whether the defeat of Trump’s party will bring economic relief to India or create new challenges.
Crude oil
India imports approximately 85-90% of its crude oil needs. Therefore, changes in international crude oil prices directly impact the country’s import bill, the rupee, inflation, and the current account deficit. A Democratic victory in the US Congress could increase pressure on the Trump administration to end the ongoing conflict with Iran.
If tensions in West Asia ease and oil supplies normalize, international crude oil prices could see some relief. This will benefit India hugely. Cheaper crude oil will reduce the country’s import bill, cool inflation and bring down the deficit figures. This could reduce costs for petroleum companies and help control inflation. Furthermore, pressure on the rupee will likely ease and the current account deficit will narrow. Ajay Kedia, director of Kedia Advisory, told Money9live.com that crude oil could reach $80 in the near future.
Gold price
The impact of the US election is also being felt on gold prices. Following the election results, gold has received support from the weakness in the dollar and US bond yields. Following the Democrats’ victory, gold prices rose by approximately 2.2 percent to $4,016 per ounce on Wednesday in the international market. The weak dollar and the decline in US bond yields were cited as the main reasons for this. According to Ajay Kedia, director of Kedia Advisory, Trump’s defeat could lead to a surge in gold and silver prices. In the coming days, gold could reach ₹1.65 lakh and silver could cross ₹2 lakh.
Silver
The impact of the US elections on silver may be slightly different from that on gold. This is because silver is used for both investment and industrial purposes. It is in demand in sectors such as solar panels, electronics, electric vehicles, automobiles, and data centers. A decline in the dollar and US bond yields could also provide support for silver. Furthermore, if global uncertainty increases, investors may increase their exposure to silver along with gold.
Stock market
The US midterm elections can impact the Indian stock market primarily through the dollar, US bond yields, and foreign investor buying. Some positive signs have emerged on all three fronts since the elections. In fact, when US bond yields rise, investing in US government bonds becomes attractive to foreign investors. They may withdraw funds from emerging markets like India and invest in the US. Conversely, a decline in US bond yields and the dollar may increase investment potential in markets like India.
Weakening dollar
A weakening US dollar could help the Indian rupee in several ways.
It could encourage FPIs to invest more in the Indian stock market
The rupee may appreciate against the dollar
Rising flow of foreign capital can improve liquidity in the market
Companies dependent on imports may get cost relief
The decline in US bond yields may somewhat ease global financial conditions somewhat
IT companies
A Democrat victory in the US is also significant for Indian IT companies, as the US market accounts for a significant portion of the Indian IT sector’s total revenue. Changes in US regulations related to immigration, H-1B visas, outsourcing, and AI could directly impact the business of Indian IT companies. The US accounts for approximately 57 percent of the Indian IT sector’s total revenue. Meanwhile, Indian citizens accounted for approximately 71 percent of H-1B visas granted by the US in 2024.
Any impact on H-1B visa?
The Trump administration has decided to impose a fee of $100,000 on new H-1B visa applications. This could make it more expensive for Indian IT companies to send employees to the US. Following a Democratic victory, this decision and immigration policies may face greater debate and scrutiny in the US Congress. This could potentially provide some relief to Indian IT companies and employees in the future.
Some analysts have pointed to increased oversight of regulations related to large technology companies, AI, and data centers in the US. This could also impact Indian IT companies, as they provide AI, cloud computing, data management, and digital services to US companies. Continued investment in AI and data centers could also create new business opportunities for Indian IT companies.
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