Archive · 8 Nov 2025
US Market Correction Biggest Risk for India, Says S Naren
Imagine the stock market is like a big playground.
A market expert named S Naren thinks the biggest problem for all the playgrounds, including India's, is if the biggest playground, which is in the United States, has a big fall.
This is because many other playgrounds are connected to it, and if it falls, they likely will too.
He explains that the worry isn't about the new computer brains called AI, but about the stocks of companies making AI stuff.
These stocks might be priced too high, like a toy that costs too much.
He says that India's playground hasn't been doing as well as others lately.
Right now, people in India are mostly buying stocks, which helps keep the playground steady.
But for India's playground to really grow in the future, people from other countries need to bring more of their money to invest.
Market expert S Naren identifies a US market correction, especially in AI stocks, as the primary risk to global markets, including India.
He notes that India has underperformed other global markets on a relative basis.
The current Indian market is largely supported by domestic investors through Systematic Investment Plans (SIPs).
Naren differentiates the risk to AI technology from the risk associated with 'AI stocks,' drawing parallels to the dot-com bubble.
He believes foreign investment inflows will be crucial for India's next growth phase, potentially seeing FIIs turn net buyers within 12 months.
- Who
- S Naren, Executive Director and Chief Investment Officer at ICICI Prudential AMC
- What
- Warning that a US market correction is the biggest risk to global markets, including India, due to high valuations and the performance of AI stocks, while noting domestic inflows are currently supporting the Indian market.
- When
- Current market conditions and outlook for the next 12 months
- Where
- Global markets, with a specific focus on the US and India
- Why
- Concerns over US market valuations, the performance of AI stocks, and the need for increased foreign investment for India's future growth phase.
Risks to Global and Indian Markets
Potential for Indian Market Strength and Recovery
US Market Influence
Risks to Global and Indian Markets
A significant correction in the US market, particularly among AI stocks, poses the biggest risk to global markets, including India. Given the US's large share in global indices, it's unlikely for India to rise if the US declines.
Potential for Indian Market Strength and Recovery
On a relative basis, India may perform better as it has underperformed other global markets. Domestic investors, through steady SIP inflows, are currently absorbing supply, which could lead to a rally if supply decreases over time.
AI and Valuations
Risks to Global and Indian Markets
The risk is not with AI technology itself, but with 'AI stocks' potentially experiencing a crash similar to dot-com era internet stocks. High valuations across global markets, including the US, create uncertainty.
Potential for Indian Market Strength and Recovery
Foreign investors might eventually turn into net buyers within the next 12 months, which could be crucial for India's next growth phase, especially if foreign inflows increase to 3% of GDP.
Market Behavior and Investor Flows
Risks to Global and Indian Markets
All global markets are currently considered costly, and absolute market behavior is uncertain. Foreign institutional inflows have been minimal, placing the burden on domestic investors to absorb supply.
Potential for Indian Market Strength and Recovery
If foreign investors increase their participation, it could significantly boost India's growth. The potential for foreign inflows to match domestic investments is seen as a positive sign for future market performance.
- Expert
- S Naren, Executive Director and Chief Investment Officer at ICICI Prudential AMC
- Primary Risk to Global Markets
- Correction in the US market, particularly AI stocks
- US Market Share in Global Index
- Approximately 60%
- Current Driver of Indian Market
- Domestic investors via SIPs
- Foreign Investor Role (Past vs. Present)
- Minimal current participation compared to historically double domestic investments
- Potential for Future Growth
- Dependent on foreign inflows matching domestic investors
Sources
Why are tech stocks falling today? Nifty IT Index down over 1%
Why is the Indian stock market struggling to hit new highs despite strong growth, low inflation? Explained
Rupee nudges up on week as central bank intervention holds the line
Five reasons why the market bears may be wrong
Sona BLW, PNB Housing Finance among stocks with biggest drop in FPI holdings
Rupee slips 2 paise to settle at 88.65 against US dollar
FPIs pull out ₹13,740 crore this week despite IPO optimism
