The upcoming 2026 World Economic Forum in Davos is set to attract global attention as investors await key insights from U.S. President Donald Trump. Taking place from January 19 to 23 in Switzerland, this year’s forum is centered around the theme ‘A Spirit of Dialogue.’ Many investors are concerned about the potential ramifications of Trump’s policies on the market, particularly amid current geopolitical tensions.
Davos 2026: Implications for Indian Investors
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, has highlighted the volatility expected in the days ahead. He pointed out that if Trump enforces proposed tariffs—10% on eight European nations starting February 1, escalating to 25% by June—retaliation is likely, potentially leading to a damaging trade war. Such developments could negatively affect global growth and market stability.
Key Concerns for Indian Investors
While Trump’s interaction with Europe captured headlines, Indian investors remain anxious about the unresolved India-U.S. trade deal. Despite multiple rounds of negotiations, a consensus is still out of reach. Additionally, Trump’s backing of a Russia sanctions bill poses threats, with potential tariffs soaring up to 500% on nations purchasing Russian oil. This situation could particularly impact India.
Market Sentiment and Foreign Investment
- In January 2026, Foreign Institutional Investors (FIIs) sold Rs 8,400 crore worth of Indian stocks.
- FIIs recorded outflows of $18.8 billion in 2025, marking a significant trend that began in July.
- Factors for outflows include high valuations, slowing earnings, and macroeconomic risks.
Despite these challenges, analysts remain hopeful due to Q3 earnings expectations. JM Financial projects that Nifty50’s Profit After Tax (PAT) could grow by 9.8% year-on-year for Q3FY26, fueled by robust performances in IT, automobiles, telecom, metals, and industrial sectors. Furthermore, Axis Securities anticipates an 11.8% and 9.7% year-on-year growth in revenue and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), respectively.
Nonetheless, experts emphasize that mere earnings growth may not be sufficient to attract back foreign investors. There are concerns that without a resolution on the India-U.S. trade deal, India could face economic instability, wider trade deficits, a faltering rupee, and further capital flight. Shrikant Chouhan from Kotak Securities and Ajit Mishra from Religare Broking both agree that sustained FII inflows will hinge on the state of U.S. markets, falling bond yields, and greater clarity on trade.
As Trump gears up to speak in Davos, investors are keenly watching for clues. The decisions he makes regarding tariffs, sanctions, and trade negotiations could have lasting implications for emerging markets throughout 2026.
