Summary:
This summary is based on the UTI Mutual Fund “Equity Market Insight – February 2026” webinar featuring Vetri Subramanyam (MD & CEO, UTI AMC) and Karthik Lakshmanan (Fund Manager, UTI Large Cap Fund). The discussion covered global macroeconomic shifts, trade developments affecting India, fiscal policy outlook, and implications for equity markets.
Global and Macroeconomic Drivers
Global Debt Shift Toward Governments
A major macro trend over the last two decades is the sharp rise in government debt. Prior to the 2008 Global Financial Crisis, debt expansion was largely driven by households and corporations. However, since the crisis, governments have taken on significantly more debt to support economic growth and stabilize economies. This has resulted in higher interest payment burdens for governments, especially in developed economies. With both debt levels and interest rates rising, interest payments as a percentage of GDP have increased sharply across countries. This reduces fiscal flexibility, leaving governments with less room for growth-oriented spending.
Emerging Markets vs US Performance
Emerging markets have outperformed the US in the past year while the US dollar has weakened. Although historically a weaker dollar tends to support emerging market performance, the relationship is correlational rather than causal. Market performance ultimately depends on multiple factors, with corporate earnings growth and valuations being the most important drivers. Currency movements alone cannot explain sustained equity market performance.
Global Trade Dynamics and India’s Position
Shift from Multilateral to Bilateral Trade
The global trade environment has shifted away from the multilateral framework (WTO-driven system) that dominated since the 1990s. Countries are increasingly relying on bilateral trade agreements.
India has actively pursued several such agreements in recent years with partners including:
- Australia
- UAE
- EFTA nations
- New Zealand
- European Union
The India–EU trade agreement is particularly significant because the EU is India’s largest trading partner. Currently, India’s share of EU imports remains relatively small compared to China. The agreement could help Indian exporters gain market share, though European exporters will also gain greater access to the Indian market.
India–US Trade Relations
The earlier trade tensions with the US around reciprocal tariffs and Russian crude purchases have largely been resolved. The current agreement effectively restores tariff conditions similar to those that existed in April 2025. India does not gain a major tariff advantage relative to peers, but it also avoids a competitive disadvantage. Given the US’s economic and geopolitical importance, simply moving away from a trade stalemate is considered a positive outcome for India
India’s Fiscal Policy and Growth Outlook
Fiscal Consolidation with Continued Capex
The recent Union Budget reflects a balanced approach:
- Government capital expenditure remains strong
- Fiscal deficit is gradually being reduced
The period of aggressive fiscal tightening appears largely behind us, and the current fiscal stance remains supportive of economic growth. Maintaining infrastructure investment while improving fiscal discipline provides long-term growth support without significantly weakening public finances.
Implications for Equity Markets
Key Structural Factors to Watch
Several structural factors will influence equity markets going forward:
- Government Debt Levels Globally
Higher debt and interest costs may limit fiscal stimulus in developed markets. - Global Trade Reconfiguration
Bilateral trade agreements will increasingly shape supply chains and export opportunities. - Corporate Earnings and Valuations
These remain the most important drivers of equity market performance over the long term. - India’s Trade Integration
Agreements with large economies like the EU and US can gradually strengthen India’s export competitiveness.
Investment Perspective
For investors, the key takeaway emphasized in the session is that short-term news flow should not drive investment decisions. Markets will continue to face daily volatility due to geopolitical and macro developments. However, long-term outcomes are primarily determined by corporate earnings growth and valuations, not by short-term macro headlines. Maintaining a disciplined investment approach aligned with financial goals remains the most important strategy for equity investors.
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