AI boom drives US & China stocks, but Indian market stays in holding pattern: Arvind Sanger

The US stock market is showing signs of fatigue after a strong rally, with investors awaiting further clarity on the Federal Reserve’s rate cut cycle. According to Arvind Sanger, Managing Partner at Geosphere Capital, the optimism around artificial intelligence (AI) continues to drive U.S. and Chinese equities, but investors should brace for volatility and avoid over-reliance on a single theme.

Fed’s balancing act: Inflation vs. labour slowdown

Speaking to ET Now, Sanger said the Fed faces a “challenging position” as it weighs slowing employment data against stubborn inflation, which is still hovering around 3%. While the Fed recently cut rates by 25 basis points, he believes further moves will be decided “meeting by meeting.”


“I still expect one more cut, but I am not sure if we will get two,” Sanger said, noting that the market remains nervous about whether the U.S. rally can sustain itself amid these uncertainties.

AI-led growth drives US and China markets

AI continues to be the strongest growth driver for global equities, particularly in the U.S. and China. Tech giants like Nvidia and Alibaba are making multi-billion-dollar investments in chips and data centers, fuelling optimism.

“Two of the major markets are very much AI-driven,” Sanger explained. “The risk is that such overdependence on one sector means even a slight negative data point could trigger profit-taking.”

Still, he does not expect the AI cycle to collapse. “It is more about trading volatility than any fundamental wheels coming off,” he said, pointing out that the U.S. economy has so far weathered tariff-related cost pressures relatively well.

Powell’s valuation warning seen as irrelevant

Commenting on Fed Chair Jerome Powell’s recent warning that U.S. equities look “slightly overvalued,” Sanger recalled former Fed Chair Alan Greenspan’s famous remark about “irrational exuberance” in 1996—years before the dotcom crash.

“The ability of the Fed chair to comment on valuations and influence the market is irrelevant. If the market chooses to go up, it will go up, with or without Powell’s view,” he said.

India: Rational GST, capex push, but global headwinds remain

Turning to India, Sanger highlighted the government’s efforts on GST rationalization and capex spending as sensible and necessary steps to stimulate growth. However, global headwinds, including the U.S. tariff regime and visa-related restrictions, remain a drag on sentiment.

“The Indian market is in a bit of a holding pattern. It creates buying opportunities, but I do not think markets will run away until some of these clouds get lifted,” he observed.

While India benefits from strong domestic demand, Sanger warned that export-driven sectors like IT and manufacturing could continue facing pressure from tariff disputes and H-1B visa changes.

Commodities steady, oil well-behaved

On commodities, Sanger said energy demand is stable and oil prices are “reasonably well-behaved,” avoiding runaway inflationary risks. However, he noted strong moves in gold and copper, both of which remain attractive to investors seeking diversification amid bond market uncertainty.

Buying opportunities in India, volatility abroad

Sanger concluded that while global markets may see short-term corrections, the underlying AI-driven capex cycle is intact. For India, however, clarity on trade relations with the U.S. and continued domestic policy support will be key to breaking out of the current consolidation phase.

“Until some of these clouds lift, India will remain in a holding pattern,” he said, while adding that such periods create long-term opportunities for patient investors.