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Global markets are entering a historic shift in power dynamics as the US and China reshape geopolitical and economic order, according to Swarup Mohanty, vice chairman and chief executive at Mirae Asset Investment Managers (India).

With these two giants in play and changes around key forces like the dollar and oil, market sentiment is bound to shift, Mohanty told Mint in an interview.

Markets cannot be sustained on liquidity alone, he said. Earnings must support valuations. Once earnings recover, currency stabilizes and valuations improve, the conditions for foreign investor flows start aligning, said Monhanty, whose fund house manages assets worth ₹2 trillion. Edited excerpts:

You have earlier said there are many things in the world that matter, but few that one can control. How do you apply that philosophy to the markets?

Focusing on what matters and what is within your control helps you filter out noise. Currently, we’re seeing immense volatility, inflation, reforms, and a war involving the US. Ten weeks can feel like ten market cycles. Once you strip away what you cannot control, you can focus sanely on your portfolio.

India remains a secular growth story. Macroeconomic fundamentals have improved over the past decade, and markets ultimately converge with corporate earnings. We expect significant positive action by the third quarter of 2026.

Historically, India has been among the most consistent growth stories globally. For a fund manager, India is a good asset, and today’s noise simply provides a good price. Zeroing in on this realization changes your approach to investing.

You said dynamics change when the US is involved in war. How does this present conflict differ from others, like the Russia-Ukraine war?

In 2008, Warren Buffett simplified it: the world transacts in dollars. However, we are now at a unique juncture where sovereign reserves in gold are higher than in dollars, a shift unseen in 30 years, suggesting the dollar's global dominance is changing, and that is probably why we are seeing all this noise from the US.

The world's other primary currency is oil. As an oil-dependent nation, India’s CPI inflation and broader economy are impacted daily. Conflicts involving the US and the Middle East therefore require close monitoring.

Oil recently spiked past $100 per barrel, which was concerning. Prices have since stabilized, but sustained levels above that threshold could create a volatile environment for global markets. Because oil has entered this dynamic zone, it is crucial to track it much more intensely than before.

Do you think Indian markets are overreacting or underestimating risks, or simply moving in lockstep with global sentiment?

Global sentiments inevitably shift in scenarios like this. Historically, war is viewed as a major risk, but while the Russia-Ukraine conflict was eventually factored in, nobody predicted the current level of involvement from the US and Russia.

We are witnessing a historical "change of eras" where the big guys will play. We are seeing structural play from the US. The US is rising to address its internal issues with a specific approach, while China plays a significant but stoic role in its bid for global dominance.

When these two giants are active alongside structural shifts in key global forces such as the dollar and oil, changes in market sentiment are natural.

With war escalating and oil prices rising, do you think earnings growth in India could take a hit? Could these factors impact the interest rate outlook?

The US takes a defensive stance when its stock markets are impacted because, as a capitalist economy, it understands their vital importance. India could take a cue from that and work more constructively towards strengthening and deepening stock market participation.

Despite global noise, India remains the world's most compelling growth story. While we are poised to grow at 6.5% to 7%, high oil prices may hurt in the near term. However, the long-term outlook is intact as corporate earnings continue to roll.

Liquidity in the market remains intact and is a structural story. As more young investors enter the market, financial penetration is rising sharply, so liquidity shouldn’t be a concern going forward.

Ownership patterns may be changing, but with external factors, stretched valuations and overbought pockets correcting, the market is becoming healthier, and the margin of safety is gradually shifting back to investors.

Is liquidity becoming a concern, given that domestic investors are buying even as FIIs sell?

Markets cannot be sustained on liquidity alone; they require earnings to support valuations. While liquidity drives prices, it will eventually squeeze if earnings fail to deliver. Current FII exits are driven by global risk-reward dynamics, as rising sovereign bond yields in their home countries and an inconsistent rupee justify a flight to safety.

Foreign investors seek four things: structural growth (which India has), corporate earnings (returning after a two-year lull), currency stability, and political stability. With currency stabilizing and market prices improving, India is ticking all the boxes for an eventual FII reversal. Investors are driven by value rather than emotion, and while I can't predict the exact timing of their return, the conditions are clearly aligning for it.

Simultaneously, a permanent structural shift has occurred where Indian investors now own more of their own market. However, institutional and retail money must co-exist; one cannot substitute the other. As retail participation grows, it is crucial that investors remain aware of the inherent risks of owning equity to ensure a healthy ecosystem.

In the event that global capital exits the US due to mounting uncertainty, is India positioned to capture those inflows?

India is distinguished by three key factors: one of the world's strongest regulatory frameworks, a banking system that is up to the mark, and a robust stock market infrastructure. Our post-covid tech upgrades have been a staggering story, providing the necessary infrastructure for large investors.

Also, India has become one of the world's largest IPO issuers. This has dramatically increased the breadth of the market over the last five to six years, offering far more opportunities for both foreign and Indian fund managers. With new segments like AMCs, hospitals, chemicals, and textiles listed, the market is much more sophisticated in both length and breadth. Ultimately, India possesses the infrastructure, intent, and capability to absorb global capital.

Are there any particular sectors that appeal to you even in this market?

In times of adversity, we return to the core: consumption. India is a consumer-led economy, and we have prioritized this sector for 17 years. Indian consumption is shifting from low-and mid-level to mid- and high-level every year. The banking system has also become very robust, with highly capitalized and tech-driven banks offering a structural play.

Healthcare remains a perennial favourite, while energy, specifically the shift to new-age power and new-age infrastructure, also looks promising. These pillars of the Indian economy are performing well.

However, it is now a stock-picker's market, where great businesses are available at good prices. For those who dig into these opportunities with patience, a lot can happen in this country.

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