Tata Motors to Bharat Forge: Stock winners and losers in India from US Vote

Drugmakers and software exporters are the top performers in India’s $2.1 trillion equity market this year amid the pandemic
India’s information technology and pharma stocks are among those that investors will be watching closely as they await the outcome of next week’s US presidential election.

 
Drugmakers and software exporters are the top performers in India’s $2.1 trillion equity market this year amid the pandemic. The result of the Nov. 3 vote could have a bearing on these companies through taxation, trade and immigration policies, and currency movements. More broadly, India is seen emerging as one of the biggest beneficiaries in Asia Pacific from the election, irrespective of the outcome, according to UBS Group AG.

A UBS analysis of the potential impact on a dozen of the region’s biggest markets put India as a winner in each of their three chosen scenarios: a Biden and Democrat sweep, a Biden victory and divided Congress, and a status quo Trump victory. The study, published last month, takes into account factors like trade and foreign policy, Federal Reserve policy and fiscal spending on infrastructure.

The benchmark S&P BSE Sensex Index dropped an average 2.1% in the five trading sessions following the last five U.S. presidential elections, according to data compiled by Bloomberg.

Here are some key things to watch in India with respect to the upcoming US vote, according to analysts. (Individual stock moves mentioned are year-to-date performances.)

Information Technology

 
The S&P BSE Information Technology Index’s 36% rally this year is the second-best performance among 19 sector groups. Indian software exporters derive a large share of their business from the U.S. While the Trump administration has been vocal about protecting U.S. jobs and wages, Biden’s articulated stance is a lot more moderate on the issue, according to Citigroup Inc.

“While the visa restrictions on the movement of people seen during the Trump era may not be there, higher taxes could mean a pullback on spending by companies, especially in the banking, financial services and insurance, which could be negative for the Indian IT firms,” said Nitin Bhasin, head of equities research at Ambit Capital Pvt.

The other impact could come from currency movements. Large stimulus by the Democrats could lead to further weakness in the dollar, potentially spurring gains in the Indian currency. A stronger rupee reduces the value of repatriated earnings for software exporters.

Key stocks: Tata Consultancy Services Ltd. (+21%), Infosys Ltd. (+47%), HCL Technologies Ltd. (+46%), Wipro Ltd. (+37%) and Tech Mahindra Ltd. (+5.5%).

Pharmaceuticals

The S&P BSE Healthcare Index has beaten all sector peers in India with an almost 45% surge this year. About 80% of the active ingredients in medications taken in the U.S. come from overseas -- mainly from India and China -- and the Trump administration has outlined plans to pump millions of dollars into producing more medications at home.

While Trump’s tenure has seen a busy US Food & Drug Administration issuing observations on Indian manufacturers, the focus in the event of a Biden win would be on his call for investments in virus testing, a public health plan and the race for a vaccine.

“A new comprehensive health plan could be an opportunity for India’s generic drug manufacturers to further grow business in the U.S.,” according to B Gopkumar, chief executive officer at Axis Securities Ltd.

Key stocks: Sun Pharmaceutical Industries Ltd. (+7.1%), Dr. Reddy’s Laboratories Ltd. (+72%), Cipla Ltd. (+60%), Lupin Ltd. (+23%), Aurobindo Pharma Ltd. (+70%).

Autos, Auto Components

 
While an acceleration in U.S. economic growth accompanied by recovery in consumer demand and strong industrial growth could be positive for Indian auto exporters, any curbs on imports from the South Asian nation owing to intensification of trade disputes would be negative, according to a Citigroup report dated Oct. 18.

Key stocks: Tata Motors Ltd. (-27%), Motherson Sumi Systems Ltd. (-27%), Balkrishna Industries Ltd. (+35%), Bharat Forge Ltd. (-4.8%).



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