After years of US equity market outperformance driven by Big Tech and the AI boom, global investors may be entering a phase where returns are no longer as one-sided. Alekh Yadav, Head of Investment Products at Sanctum Wealth, believes valuations in marquee US stocks appear stretched, with emerging risks around debt-funded capex, circular financing, and AI revenue growth lagging investment.

Current US Market Performance

As of January 13, 2026, US markets showed mixed performance with notable movements across sectors:

Geopolitical Impact Assessment

Regarding potential impacts from US military operations in Venezuela, Yadav notes that the operation turned out to be very targeted and limited, resulting in minimal initial impact on US financial markets. However, he emphasizes that the situation remains uncertain with no clarity on how events will unfold or the level of US involvement, suggesting volatility could be expected.

For sector-specific impacts, Yadav highlights that the immediate effects appear limited. A key factor to monitor is the US approach to Venezuelan oil reserves, which could affect US oil companies with some facing headwinds while others may benefit.

Investment Outlook and Recommendations

Looking ahead to 2026, Yadav presents a cautious view on adding to existing US portfolios. US equity markets have delivered strong rallies in recent years, driven by the Magnificent Seven and AI companies, but he believes valuations in this segment are stretched.

Key Risk Factors Identified:

• Rising debt-funded capital expenditure
• Circular financing practices
• AI application revenue growth lagging behind capex spending
• US economic headwinds from slowing labour market
• Inflation remaining above the Fed's 3% target

While acknowledging that the AI-driven rally may continue, Yadav recommends that investors diversify their international exposure beyond US equities. This strategic shift reflects his view that the next phase of global investing may require looking beyond traditional US market dominance as macro risks and valuation concerns mount.

Foreign Portfolio Investors continued their selling streak in Indian equities on January 12, 2026, with net outflows of ₹3,638 crore, while Domestic Institutional Investors provided crucial market support through net purchases of ₹3,769 crore. Despite the foreign selling pressure, Indian equity benchmarks staged a remarkable recovery from intraday lows to close in positive territory.

Institutional Investment Flows

The trading session witnessed significant institutional activity across both foreign and domestic investor categories. The detailed breakdown of institutional flows reveals the contrasting investment strategies currently at play in the Indian market.

For the month so far, the trend remains consistent with FIIs net selling ₹15.20 crore worth of Indian equities, while DIIs have been net buyers to the tune of ₹22.70 crore. This marks the fifth consecutive session of net outflows by foreign institutional investors.

Market Performance and Recovery

The Nifty 50 index demonstrated resilience by recovering sharply from the day's lows to settle at 25,790 points, registering a gain of 0.4%. The index rebounded nearly 340 points during intraday trading, breaking a five-day losing streak. Market sentiment improved following the U.S. Ambassador's comments regarding ongoing efforts on an India-US trade deal, which encouraged buying at lower levels.

Broader market indices showed mixed performance, with the Nifty Midcap 100 declining marginally by 0.1% and the Nifty Smallcap 100 falling 0.5%. The divergent performance across market segments highlighted selective investor interest.

Sectoral Performance

Sectoral indices exhibited varied performance, with certain sectors leading the recovery while others faced selling pressure.

Nifty Metal emerged as the top performer with a 2% rise after declining for four consecutive sessions. Defense stocks garnered attention amid reports that the German Chancellor's visit to India could advance discussions on a $9.30 billion submarine manufacturing deal.

Market Outlook and Key Factors

Several factors are expected to influence market direction in the near term. Capital market stocks drew attention after the SEBI chief indicated a likely NSE IPO by the end of the month. On the macroeconomic front, India's December CPI inflation rose to 1.33% year-on-year from 0.71% in November, remaining well below the RBI's comfort level.

Market participants are now awaiting U.S. CPI data, which could provide further direction to global markets. The combination of continued foreign selling pressure and domestic institutional support is expected to keep markets range-bound with stock-specific action as the earnings season approaches.