The global financial landscape is experiencing unprecedented volatility as geopolitical developments and policy uncertainty create what market expert Seth R Freeman describes as a "constantly shifting chessboard." Speaking to ET Now, Freeman from GlassRatner Advisory provided insights into how markets are adapting to renewed uncertainty stemming from U.S. developments and broader global realignments.

Market Sentiment Drives Volatility

Freeman emphasized that current market conditions are characterized by persistent uncertainty, with sentiment playing an increasingly dominant role over fundamentals. He noted that while global systems continue functioning, both investor and consumer sentiment can shift rapidly, creating significant market risks.

The expert highlighted specific vulnerabilities in the U.S. consumer market, pointing to concerning trends that could impact broader market stability:

Policy Changes Present Banking Sector Challenges

Freeman expressed particular concern about proposed policy changes, specifically plans to cap credit card interest rates at 10%. He warned this could have unintended consequences for both banks and consumers. "It is going to be detrimental to consumers. Banks' reaction, if their interest rates are capped at 10%, is that they are just not going to issue credit cards," Freeman explained.

The policy could prove problematic because banks traditionally factor in sizable loss provisions when issuing credit. A 10% cap would make credit card operations "completely unprofitable" for many institutions, potentially restricting access to credit for consumers who need it most.

Emerging Markets Positioned for Capital Inflows

Despite global uncertainty, Freeman sees positive developments for emerging markets, particularly India. He highlighted strong performance in the fourth quarter, noting that "flows to emerging markets and to India were incredible" with emerging market fund investors being "highly rewarded."

Freeman believes relative growth differentials will continue driving more capital toward emerging markets, benefiting India through both direct investment and index-based fund allocations.

Foreign Investment Dynamics in India

Addressing why foreign institutional investor holdings in India have reached decadal lows despite strong domestic flows, Freeman pointed to currency risk as a primary concern. "It is very risky for U.S. investors to invest in the Indian market when the rupee takes a hit because you can end up with a double-whammy—rupee devaluation and the market going down," he explained.

However, Freeman noted that while public market flows appear weak, substantial foreign capital continues entering India through private equity channels, suggesting sustained international interest in Indian growth opportunities.

Policy Stability Remains Crucial

Regarding India's upcoming Union Budget, Freeman cautioned against policy surprises that could disrupt market confidence. He specifically warned against sudden announcements like capital gains tax changes, noting that "the government has learnt a lot of lessons from that experience." Any easing of investment-related provisions would help restore confidence, particularly for long-term infrastructure capital.

Freeman's assessment suggests that while global markets face continued volatility from policy uncertainty and shifting geopolitical alliances, emerging markets like India remain well-positioned to benefit from capital reallocation driven by growth differentials and relative stability.