Stock market & Donald Trump: Waaree Energies, Vedanta, NALCO, Welspun Corp shares in focus today; here's why

As Donald Trump’s second-term as the US President kickstarts, stock market analysts are expecting many sweeping changes in the energy sector. Trump administration is seen taking actions to weaken the Inflation Reduction Act (IRA), a significant climate legislation signed by the Biden government in August 2022, which aims to expedite the transition to clean energy through tax incentives, grants and loans. Besides, analysts said energy supply chains could be hit on withdrawal from the Paris Agreement. Oil and gas drilling would pick pace, putting an end to new offshore wind power development. Also, the US may impose tariffs at 10 per cent on all US imports and 60 per cent on goods from China.

UBS said the US President Trump’s policy agenda—if enacted in its entirety—would have significant macroeconomic repercussions. However, financial and political constraints are likely to mean that enacted policy risks falling short of campaign pledges in some instances, it said. There is also the consideration that the President may “escalate to deescalate,” with some of his proposals likely to prove to be negotiating tactics, it added.

Things to watch?

The Trump administration may reinstate higher tariffs on solar panels, expanding the scope to inverters and batteries, and bringing Southeast Asian countries including Vietnam, Malaysia, and Thailand under the ambit of tariffs, which now dominate US solar imports.

IRA reduction, a slow down the US solar capacity addition should hurt Indian exports and would be negative for Indian module manufacturers. If there is no change in IRA but an increase in import tariffs, exports from India will be less viable, and module prices in the US will increase  against the rest of the world. "This will benefit Indian companies who are setting up plants in the US. Both Waaree Energies and Premier Energies are setting up  facilities in the US. Higher US module prices will benefit these US units," Axis Securities said.

In the case of industrial metals, Canada and Mexico are major suppliers of  steel and aluminium to the US. Imposing duty will increase US HRC steel prices against the rest of the world and increase aluminium metal premiums in the US. Some exports  will be diverted to other countries, putting pressure on prices.

"Dollar index could remain strong, impacting base metal  prices. However, the impact on each metal must be  assessed in relation to other factors, including supply  and demand drivers and Chinese stimulus. We prefers aluminium stocks over steel. Aluminium spot prices are strong despite a rally in the dollar index. Vedanta, NALCO and Hindalco are its preferred names in that order," it said.

An increase in drilling off the US coast and on Federal land would be positive for Welspun Corp, Axis Securities said.

"The outcomes might be less severe than widely feared. Historically, while the rhetoric has often been intense, the eventual actions or resolutions have tended to be more measured and rational than initially expected. This could very well be the case again," said Arindam Mandal, Head of Global Equities at Marcellus.

China-US trade war

In its base case, UBS expects the effective tariff rate on China to rise to 25-30 per cent (from 10 per cent currently). It also expects measures to protect technological interests, rules limiting transshipment, and tariffs on EU autos and pharmaceuticals.

"Possible retaliations by China could include reciprocal tariffs, weakening the Chinese yuan, and restricting critical mineral exports. A risk case would include some combination of the imposition of universal tariffs on all US imports, particularly high tariffs on China (e.g., 60 per cent), and/ or meaningful and sustained tariffs on the US’s neighbors—Mexico and Canada," UBS said.