Global Sell-Off Fears Grip India as US Complacency Peaks in 2026
Overview
Leading fund managers warn of a volatile 2026 for global markets, driven by excessive US valuations and potential dollar strength. This complacency could trigger sharp corrections and spillover risks for Indian equities, despite constructive medium-term views on India's domestic fundamentals and easing headwinds.
Global Market Volatility Looms for India in 2026
Leading fund managers are sounding alarms about a potential surge in global market volatility starting in 2026. Concerns are mounting that elevated valuations in developed markets, particularly the United States, could face a sharp unwinding. This scenario carries significant spillover risks for Indian equities.
Quant Mutual Fund Founder and CIO Sandeep Tandon highlighted this view, stating that 2026 appears fragile globally, not just for India. He pointed to "extraordinary complacency" in the US market as a major risk factor. Tandon predicts widespread multiple compression across global equities, a significant call for the year ahead.
Dollar Index and Commodity Risks
A key trigger for a potential market correction, according to Tandon, could be a near-term resurgence in the dollar index. While acknowledging a long-term downtrend, he cautioned that current positioning is crowded, making it vulnerable to a sharp move higher. Such a move could lead to significant corrections in various assets.
Near-term risks also extend to commodities, particularly metals, which have experienced a strong rally. Tandon described the recent surge as "euphoric" and anticipates a correction, though he maintains a long-term bullish stance on commodities. This suggests a period of potential turbulence in raw material markets.
India's Fundamentals vs. Global Headwinds
Invesco Mutual Fund CIO Taher Badshah noted a trend towards mean reversion across multiple market variables after years of linear growth. He suggested this could play out across the dollar, earnings, and India's relative performance. Badshah also flagged risks in the global technology and AI-led trades, warning of bubble-like conditions.
However, Mirae Asset Investment Managers (India) CIO Nilesh Surana offered a more optimistic medium-term outlook for Indian equities. He argued that 2025's weakness should be viewed in context, given Nifty's ten consecutive years of positive returns. Surana identified macro uncertainty, slowing earnings momentum, and elevated valuations as past headwinds, all of which are now receding.
Surana pointed to fiscal and monetary support in India, including income tax cuts and rate reductions, as catalysts for growth. He expects earnings growth to rebound from single digits to low teens over the next couple of years. While cautioning against expecting quick gains, Surana believes India remains a good market for steady, long-term returns.
Navigating a Selective Market
Despite global uncertainties, fund managers broadly agree that India's long-term fundamentals remain robust. As markets transition towards an era driven by earnings delivery and valuation discipline, selectivity will be paramount. Navigating a potentially volatile 2026 will require careful consideration of these evolving dynamics.
