The impact of Trump Win on India

Prakarsh Gagdani

10 Nov 2016

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)

Source: Company Reports
Company FY16 (%)
Infosys Ltd 63%
HCL Technologies Ltd 58%
Tata Consultancy Services Ltd (TCS) 54%
Wipro Ltd 53%
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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Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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The impact of Trump Win on India

Prakarsh Gagdani

10 Nov 2016

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)

Source: Company Reports
Company FY16 (%)
Infosys Ltd 63%
HCL Technologies Ltd 58%
Tata Consultancy Services Ltd (TCS) 54%
Wipro Ltd 53%
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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