India’s equity markets may witness a correction alongside global peers as rising crude oil prices, a weakening rupee and the country’s limited exposure to the artificial intelligence boom leave the local economy vulnerable to a potential US-led downturn, according to Jayesh Chandra Gupta, founder of Delaware-based investment advisory firm Peptomist LLC.
In an interview, Gupta said Indian stocks are unlikely to remain insulated if US equities enter a deeper correction, arguing that the idea of India having insulated from the global economy is misplaced.
“India is deeply linked to global liquidity, energy prices and foreign capital flows,” Gupta said in an interview from Dubai. “If the US market corrects sharply, India will feel the impact as well.”
Understanding the context behind Gupta’s statements
His comments come as American markets rallied since January this year despite concerns over slowing growth, elevated geopolitical risks and stretched valuations in parts of the AI led technology sector. In Peptomist’s latest investor newsletter, the firm warned that the current rebound in US equities increasingly resembles the “final euphoric phase” of the bull cycle rather than a move driven by durable economic fundamentals.
Gupta argued that much of the recent American market strength has been fueled by options-market activity, particularly aggressive buying of call options by retail and institutional investors. According to him, market makers selling those options are then forced to buy underlying stocks and index futures to hedge their exposure, creating a self-reinforcing rally commonly known as a “gamma squeeze”.
Gupta, a IIT graduate, said its proprietary quantitative framework has identified a period of elevated market stress in US markets beginning around mid-May, prompting the firm to position for downside through long-dated S&P 500 put options and volatility trades tied to the VIX index.
Indian equities have remained relatively resilient recently despite concerns over elevated valuations, slowing global growth and persistent geopolitical tensions. Strong domestic retail inflows through systematic investment plans of mutual funds have helped cushion markets from bouts of foreign selling, reinforcing a narrative among some investors that India can outperform even during periods of global volatility.
Gupta disagrees with that view. He expects higher crude oil prices and a weaker rupee to create fresh macroeconomic pressure for India, one of the world’s largest importers of energy. According to him, the end of key state assembly elections could also reduce the government’s willingness to absorb elevated fuel costs, forcing a larger share of higher oil prices to be passed on to consumers.
That, he said, could fuel inflationary pressures and weigh on discretionary consumption.
Gupta is particularly cautious on India’s information technology and generic pharmaceutical sectors, both of which derive a significant portion of revenue from the US market.
Indian IT companies continue to face structural headwinds because they lack meaningful positioning in the global AI ecosystem, he said, adding that much of the current optimism around AI adoption by outsourcing firms remains overstated.
“India has not built globally dominant AI platforms or global infrastructure players,” Gupta said. “Traditional outsourcing models face pressure if enterprises increasingly automate coding, customer support and back-office work using AI.”
He also warned that Indian generic drugmakers could face tighter regulatory scrutiny in the US as authorities strengthen compliance requirements for low-cost pharmaceutical imports.
Despite his broader caution, Gupta remains constructive on parts of India’s infrastructure sector, which he expects to benefit from sustained public spending and long-term urbanisation trends. He also sees further runway for cigarette and liquor companies because of strong pricing power and resilient consumer demand.
Peptomist’s portfolio positioning currently includes long-dated downside bets on the S&P 500, volatility exposure through VIX call options, bearish positions on selected equities and silver, as well as allocations to US Treasury and Japanese government bond ETFs that could benefit during a broader risk-off environment.
Gupta said his objective is not to remain bearish, but to preserve capital during periods when risks appear mispriced and redeploy into equities after valuations reset.