US Presidential Election 2024: Against the backdrop of any events happening in the US, Indian investors are generally quick to assess the future of the information technology (IT) sector as there is a strong nexus between the industry Indian computing and information technology (IT) sector. WE.

Like the 2024 US presidential election approaches, investors are evaluating the potential effects on the IT sector. Market analysts are also considering the implications for the industry and India if Kamala Harris wins, as well as the implications if Donald Trump is re-elected. Other sectors that could be influenced include automotive, energy, defense, raw materials and metals, and pharmaceuticals.

Indian IT companies are greatly affected by the US economy as they are highly dependent on US customers. Major Indian IT players such as TCS, Infosys, Wipro, HCL TechnologiesAnd Tech Mahindra generate more than half of their revenue in the United States. Changes in the U.S. economy can have a direct effect on the revenue and growth opportunities of these companies. The Indian IT and business services market is expected to reach $19.93 billion by 2025, according to the India Brand Equity Foundation.

According to Arun Kejriwal, founder of Kejriwal Research and Investment Services, the overall market will be influenced, but the IT sector will be particularly affected due to the way business works in the US, which involves currency fluctuations; These factors will have a greater impact on IT than other industries.

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

PhillipCapital, in its latest report, noted that the initial effects appear more severe if Trump is elected, due to his anti-immigration policies. Nonetheless, Indian IT companies have sought to mitigate this risk by employing more local staff in on-site markets, using subcontractors and establishing additional delivery centers near the coasts.

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 habits of US companies, from so the electoral cycle is not expected to have a significant impact. change the trajectory of the sector.

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

Political impact on India

Arun Kejriwal said that the US elections will not only influence the IT sector; What other factors do people consider? Currently, Democrats are in power and the election results are too close to call. It is not certain whether the Democrats or the Republicans will prevail. A few key geopolitical issues are emerging as both candidates currently express anti-China sentiments. Such stances against China can benefit India by improving export opportunities and fostering better relations. However, there is also some anti-India rhetoric, especially from Canada, which adds a layer of negativity. The political landscape is quite complex and clarity will likely only emerge once the new president is in office.

China’s initiative to engage with India at the BRICS meeting highlights the plight of its economy, which is in poor shape. They need a large market to buy their products. Currently, the only country capable of consuming Chinese production is India. It is not certain whether India will fully reopen its market to China as it did five to eight years ago. If it chooses to reopen, it will likely do so with numerous restrictions to restore trust between the two nations. This will not be based on blind trust. If we continue to manage our relationship with China, the United States will inevitably seek to strengthen its ties with India. At the same time, it must sell defense equipment to India.

What does this indicate in the walk? The market is unlikely to see a crushing triumph on one side or the other, and it doesn’t matter who takes the helm – whoever it is. However, depending on who intervenes and how they react in India, future circumstances will depend on it.

Indian IT Sector Outlook

The IT sector’s results have so far largely met expectations. In the United States, the BFSI sector is experiencing a recovery, marked by increasing volumes and a slow rise in discretionary spending. Conversely, in Europe, particularly in the automotive and manufacturing sectors, challenges remain that impact the performance of various companies. Overall, organizations are operating in a challenging macroeconomic landscape, with demand stabilizing across key verticals, according to Saurabh Patwa.

Positive indicators point towards a more robust recovery in the IT sector in the coming quarters. The resurgence in financial services, along with broad-based growth expected in the second quarter of FY25, is expected to improve performance in the second half of FY25 and beyond. The impressive results from major US banks are promising, suggesting a potential trickle-down effect that could benefit Indian IT services as we move forward.

“While the sector could face margin pressures due to seasonal factors such as furloughs and wage hikes, the lower interest rate cycle is likely to lead to an increase in discretionary spending, boosting thus the IT demand,” Patwa added.

Disclaimer: The above opinions and recommendations are those of individual analysts, experts and brokerage firms, and not of Mint. We advise investors to seek advice from certified experts before making any investment decisions.