US Market Correction: Biggest Risk to Global Markets, Including India
Sankaran Naren, Executive Director and Chief Investment Officer at ICICI Prudential AMC, identifies a potential correction in the US equity market as the greatest threat to global markets. While he notes that India might perform better in comparison to other markets, the overall high global valuations could trigger declines anywhere.
Concerns Over US Market Impact
Speaking at CNBC-TV18’s Global Leadership Summit, Naren emphasized the outsized influence of the US market, which comprises nearly 60% of the global index. He stated:
“The major risk now is something going wrong in the US, especially with AI stocks. Since the US makes up nearly 60% of the global index, it is unrealistic to expect India to rise if the US declines.”
He further explained that although India has been an underperformer compared to most markets, its relative positioning could improve if the US market stabilizes.
Market Valuation and Uncertainty
Naren highlighted the expensive nature of global markets today, adding:
“How the absolute markets behave from here is uncertain. Every market in the world is very costly today.”
Global Ripple Effects of US Decline
He warned that a sharp fall in US markets would have worldwide consequences, regardless of a country’s individual economic strength:
“The world’s biggest market is the US. If the US goes down 20%, any market in the world will find it hard to go up.”
Reflecting on historical precedent, Naren noted that even during the 1999–2001 crash, Indian markets fell despite a relatively strong economy.
Summary
The vulnerability of global markets to a US downturn, especially given its dominant share and the high valuations worldwide, poses significant risks—even for relatively stronger or better-performing markets like India.
Author’s Summary
Global equity markets face significant risks from a US market correction, with India likely to feel the impact despite potential relative outperformance amid overvalued conditions everywhere.