As global markets grapple with rising geopolitical uncertainty under US President Donald Trump, leading Indian fund managers remain broadly constructive on India’s equity outlook. At the CFA Society India Investment Conference held in Mumbai on January 9, market veterans struck a measured but optimistic tone, arguing that India’s structural growth drivers are firmly in place despite near-term volatility.

Indian equities have gone through a prolonged phase of consolidation after a strong multi-year rally. Valuations, particularly in mid- and small-cap segments, remain elevated by historical standards, while global macro risks ranging from geopolitical tensions to uneven global growth continue to cloud sentiment. The return of Donald Trump to the US presidency has further complicated the outlook, introducing policy unpredictability around trade, geopolitics, and global capital flows.

Against this backdrop, investor confidence has been tested, especially among retail participants who had grown accustomed to steady gains. The conference provided a platform for experienced market participants to assess whether current uncertainty represents a structural shift or a familiar pause in India’s long-term trajectory.

According to Vikas Khemani of Carenlian Asset Managers, the past year should be viewed as consolidation rather than deterioration. “I think 2026 will be better than 2025,” he said, drawing parallels with earlier periods of heightened uncertainty, including the phase following the outbreak of the Ukraine war. In his assessment, pessimism often peaks just before conditions begin to stabilise.

Khemani highlighted that India’s macroeconomic foundation has strengthened even as global disruptions persisted. Over the past 12 months, he pointed to a combination of fiscal stimulus, monetary easing, liquidity infusion, and policy actions aimed at sustaining growth. Government capital expenditure has remained robust, while private capex has shown signs of revival a combination that reinforces the domestic growth engine.

For investors, the distinction between consolidation and correction is critical. If the current phase is indeed cyclical, it suggests that long-term allocators should focus on earnings durability rather than short-term price movements. India’s ability to maintain growth momentum despite global headwinds reinforces its positioning as a structural compounder within emerging markets.

However, panelists were candid about the challenges. Chirag Setalvad of HDFC AMC acknowledged that valuations remain a key constraint. While long-term returns remain strong with five-year equity returns still in the 20 percent range and mid-cap returns of 16–17 percent over a decade the market has already priced in a significant portion of optimism.

“Valuations are still at a premium,” Setalvad said, noting that mid-caps trade at a 15–20 percent premium, while small caps are 14–15 percent above long-term averages. In his view, periodic corrections are necessary to normalise expectations and create healthier entry points.

Although the discussion was not policy-driven, speakers repeatedly referenced India’s supportive macro policy environment. Continued government spending, accommodative liquidity conditions, and growth-oriented reforms were cited as stabilising forces. These factors, while not eliminating volatility, reduce the probability of a structural slowdown a key reassurance for long-term investors.

From a market standpoint, the comments suggest that India may remain range-bound in the near term, with returns driven more by earnings growth than valuation expansion. A slowdown in IPO activity and greater valuation sensitivity among retail investors indicate that speculative excess is cooling a development many see as constructive rather than negative.

On the global front, Setalvad struck a cautious note. He flagged challenges in the US sustaining recent growth rates, structural issues in China, and economic weakness in Europe. This uneven global backdrop could limit upside for export-oriented sectors, while reinforcing the importance of India’s domestic demand story.

Prashant Khemka of WhiteOak Capital argued that expectations for Indian equities remain remarkably stable despite the noise. He suggested that a “fair coin flip” outcome for Indian markets typically translates into 10–12 percent annual returns a benchmark he believes still holds for 2026.

Addressing valuation concerns, Khemka dismissed the notion that India is meaningfully overvalued. He argued that India has historically commanded a premium due to stronger property rights, democratic institutions, and governance stability. Notably, he pointed out that India currently trades at a larger discount to US equities than its 25-year average, excluding periods of global crisis.