How global events impact Indian Mutual Funds
It’s a common morning routine: you check the news and see that the US Federal Reserve has changed interest rates or that there’s a new trade policy in Washington. You might think, How does this affect my Small Cap fund in India? In 2026, the world of finance is more connected than ever. Your mutual funddoesn't exist in a vacuum; it’s part of a giant global web. When a global butterfly flaps its wings, it can cause a market storm in Mumbai. Understanding these connections is the difference between panicking during a dip and staying calm with a long-term plan.
Here is how the biggest global macro events impact your Indian mutual funds.
US Federal Reserve Interest Rates
The US Federal Reserve (the Fed) is the most powerful central bank in the world. When they change interest rates, money moves across the globe.
- When the Fed Cuts Rates (The 2025 Trend): In late 2025, we saw the Fed cut rates to around 3.50%–3.75%. This is generally good for India. Why? Because when US rates are low, global investors (FIIs) look for better returns in Emerging Markets like India. This brings fresh dollars into our stock market, pushing up the NAV of your equity funds.
- When the Fed Raises Rates: The opposite happens. Investors take their money out of India and go back home to the safety of US Dollars, which can cause Indian markets to temporarily drop.
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Global Crude Oil Prices
India imports about 85% of its crude oil. This makes our economy very sensitive to oil prices.
- High Oil Prices: When global tensions (like the 2025 Venezuelan blockade or Middle East conflicts) push oil prices up, it’s a double blow for India. It makes transport more expensive (causing inflation) and weakens the Rupee. This usually hurts the returns of Auto, Paint, and Airline mutual funds.
- Low Oil Prices: This is a gift for India. It lowers inflation and gives the government more money to spend on infrastructure, which helps Infrastructure and Banking funds.
Geopolitical Tensions & Safe Havens
In 2025, ongoing tensions between major powers have kept the markets on edge. When the world feels unsafe, investors stop buying risky stocks and start buying Gold and Silver.
The 2025 Result: Because of global uncertainty, Silver and Gold ETFs were the star performers of 2025, with Silver delivering triple-digit returns in some cases. If you have a Multi-Asset fund at Motilal Oswal, your returns likely stay strong because of this precious metal safety net.
The Currency Tug-of-War (USD vs. INR)
Most global trade happens in Dollars. If the US Dollar becomes too strong, the Indian Rupee (INR) weakens.
- Impact on IT Funds: A weaker Rupee is actually good for Indian IT companies (like TCS or Infosys) because they earn in Dollars.
- Impact on Import-Heavy Sectors: A weaker Rupee is bad for sectors like Electronics or Oil Refining, as it makes their raw materials more expensive.
Global Inflation & Supply Chains
In 2025, we saw how a halt in Rare Earth Metals from China can threaten the Indian Electric Vehicle (EV) industry. When global supply chains break, companies can't produce goods, their profits fall, and your mutual fund NAV might stagnate.
This is why Motilal Oswal's Buy Right philosophy focuses on companies with Pricing Power that can survive global inflation because people will buy their products no matter what.
Conclusion: India’s Domestic Shield
The good news for 2026? Despite global storms, India has an Internal Engine. Because our own citizens (like you!) are investing billions every month through SIPs, the Indian market is no longer solely dependent on global investors.
While global events might cause a ripple for a few weeks, the long-term growth of the Indian economy is driven by domestic demand. So, the next time you see a global headline, remember: it's a reason to observe, but rarely a reason to exit.
Suggested read: Gold ETFs vs Silver ETFs - Which is better in 2026 | How Yield to Maturity impacts your mutual funds returns