The impact of Trump Win on India
Bucking media opposition, popular perception and Hillary Clinton’s campaign, Donald Trump has emerged as the 45th president of the United States of America. With Trump in the White House now, his agendas which formed basis for his win will have implications on India. These would result from his New Tax Plan, plans to bring jobs back to America, the Energy plan and his views on terrorism.
The most prominent impact would be felt by the India IT companies as major portion of these companies’ revenues come from the outsourcing and onsite business.
Impact on the Indian Information Technology (IT) Companies
According to Trump the H-1B visas grant and outsourcing IT processes are reducing employment opportunities to US as this leads to onsite jobs being transferred to non-US workforce and processes being transferred to IT hubs like India. This is a clear threat for the Indian IT companies and will impact their financial performance. The IT revenue streams most sensitive to Trump’s policies would be the Onsite revenues and outsourcing revenue.
Below mentioned are some of the IT companies that may be adversely impacted by Trump’s win.
Revenue contribution from the United States (US)
|HCL Technologies Ltd||58%|
|Tata Consultancy Services Ltd (TCS)||54%|
|Tech Mahindra Ltd||48%|
Infosys Ltd Infosys is the second largest IT Company in India. Geographically, it derives 63% of the revenue from North America. Infosys earns 56% of the revenue from the onsite business.
HCL Technologies Ltd HCL Tech is the fifth largest IT Company in India with over 450 clients. Recently, the company acquired Geometric software. HCL derives 58% of its total revenue from the US market.
Tata Consultancy Services Ltd- TCS is Asia's largest IT services provider and is amongst the top 10 technology firms in the world. It derives 54% of its revenue from the US market. A major headcount of the company works on visa.
Wipro Ltd- Wipro is the fourth largest IT player in the country derives 53% of its revenue from US and ~50% of the revenue comes from onsite projects.
Tech Mahindra Ltd- Tech Mahindra is a part of the USD 16 billion Mahindra Group. Almost ~62% of the revenue comes from onsite projects. US contributes 48% to the total revenue of the company.
Impact on the Indian Equity Market
The above chart shows that Sensex declined ~6.5% to 25,902 lows in the early morning trade on 9th November, 2016 from the previous close of 27,591 factoring in the unexpected Discontinuance of high denomination INR notes and the uncertainty around the US Presidential Elections. It recovered from the lows in the late morning trading session. Sensex continued the surge once Donald Trump was elected as the President of the United States. The Sensex today opened at 27,605, 350 points or 1.2% above yesterdays’ close.
In the short term, Trump’s win will instigate uncertainty over the emerging market economies until pursuit of his agendas and their very implementation brings further clarity. This will pave way for changes in the US economic environment and accordingly, have ripple effects on global financial markets. Indian Markets for now, with clarity on the Election results, will see the focus shift towards the domestic sphere.
In the long term, we may see our domestic markets surge higher on grounds of stronger macro fundamentals compared to other emerging markets. Furthermore, after assessing the political situation, if the Fed Hikes rates in December 2016 it may result in a temporary outflow of FII funds from Indian Markets. However, in India, the current scenario of declining inflation in conjunction with the replacement process of high denomination INR notes is expected to ease inflation further. Resultantly, RBI may further cut Interest Rates which will support growth prospects going ahead. Thereby, Trump’s win may have short term ripples on the Indian Markets in line with other emerging economies. But, in the long run, Indian markets are expected to contemplate more on improving domestic fundamental dynamics.
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