Arindam Mandal, Head of Global Equities at Marcellus Investment Managers, has shared crucial insights about the current state of global stock markets, particularly focusing on the United States and India. Contrary to growing concerns about inflated valuations, Mandal believes the US market is not experiencing a bubble but rather represents what he describes as a market of extremes.
US Market: Concentration Rather Than Bubble
According to Mandal's analysis, the perception of a US stock market bubble is largely misunderstood. The rally has been narrow, not universal, with a select group of large technology and artificial intelligence companies driving most of the returns while the broader market remains reasonably priced.
The expert revealed a telling statistic: The equal-weighted S&P 500 has underperformed the headline index by more than 10 percentage points over the past year when the dominant tech names are excluded. This significant gap demonstrates the concentrated nature of the market's performance rather than widespread overvaluation.
Mandal provided specific valuation metrics to support his assessment. The equal-weighted S&P 500 and S&P 400 midcap indices are currently trading at approximately 16-17 times forward earnings, which aligns with long-term averages when pandemic-related distortions are excluded. More cyclical sectors such as consumer and transport companies are trading at even more conservative multiples in the mid-teens range.
Earnings performance remains robust, with about 80% of companies exceeding expectations during the last quarter. Furthermore, earnings estimates for 2025 have seen upward revisions in recent months, indicating underlying corporate strength.
Indian Market Outlook: Worst May Be Over
Turning his attention to the Indian stock market, Mandal expressed cautious optimism. He believes the worst may be behind for Indian equities, particularly for large-cap companies that are positioned for earnings recovery.
While SMID (small and mid-cap) valuations remain somewhat stretched, large-cap valuations have returned to long-term averages. India's performance within emerging markets has been relatively weaker this year, which has helped reset expectations and reduce valuation pressures.
Mandal acknowledged the current negative narrative surrounding Indian markets, citing concerns about high valuations, limited job creation, and weak earnings momentum. However, he suggests this pessimism is already reflected in market pricing to some extent.
The investment expert highlighted several positive fundamentals supporting Indian markets: Healthy balance sheets, consistent credit growth, and decent policy clarity. He expects earnings recovery to drive future market performance rather than valuation expansion, with improving margins and stabilizing domestic demand supporting large-cap companies.
Global Factors and FII Behavior
Regarding global trade tensions, Mandal believes markets have largely adjusted to the new tariff environment. After initial earnings forecast reductions across several regions following the start of the new tariff cycle, revisions have turned positive again in the US, Europe, and Japan, with emerging markets showing flat to slightly higher revisions.
On the Federal Reserve's monetary policy, Mandal suggests that a slower Fed doesn't significantly hurt India compared to other emerging markets. India's strong current account, fiscal position, and domestic savings provide substantial cushion against external pressures.
Addressing the question of foreign institutional investor (FII) reluctance toward Indian markets despite healthy growth-inflation dynamics, Mandal identified multiple factors: High valuations, soft earnings momentum, and shifting global narratives. India's valuation premium remains among the highest in emerging markets, while earnings revisions have been tepid over the past twelve months.
Mandal also highlighted a perception challenge: Global investment portfolios are increasingly oriented toward the AI and productivity boom driving US market sentiment, while India is perceived as an anti-AI trade that benefits from demographics and consumption rather than automation.
The Marcellus executive also shared insights from managing one of the first actively managed global equity portfolios out of GIFT City, noting the initial regulatory and taxation challenges but praising the constructive approach of regulators and policymakers in developing the framework.
Mandal's comprehensive analysis provides valuable perspective for investors navigating current market conditions, emphasizing fundamental analysis over sensationalized bubble narratives and highlighting the distinctive opportunities in both US and Indian equity markets.
