Marc Faber sees 20% fall in Indian markets, prefers to stay in cash

Marc Faber, editor and publisher of 'The Gloom, Boom & Doom Report', says that his advice is to stay in cash and bonds for now

West Asia war has kept global financial markets on the edge in the last few months. Marc Faber, editor and publisher of ‘The Gloom, Boom & Doom Report’, tells Puneet Wadhwa in a telephone interview that his advice is to stay in cash and bonds for now. Edited excerpts:

 

Have the markets fully discounted the possibility of a resolution to the West Asia war?

 

Global stock markets are not one market. There are many markets in different countries and industries. Some stocks are extremely highly valued, especially in the United States (US). Anything to do with artificial intelligence (AI) and semiconductors is ‘in the sky’ and earnings estimates are extremely high and, in my view, unrealistic.

 

Usually, in investment bubbles or manias, earnings are grossly overestimated. Sooner or later, earnings begin to disappoint and stocks adjust very sharply on the downside.

 

Really cheap stocks are hard to find at the present time. One example would be Indonesian stocks. They are down 30 per cent this year after having been weak for an extended period. I think they are reasonably priced, but I do not think they will go up a lot in the near future.

 

What about India?

 

My view is that India has initiated a bear market and we will still go lower. It has nothing to do with the economy. The economy is doing well, but the stock market isn't cheap enough for me to buy. That said, Indian markets are cheaper than it they were in 2024 as the markets have gone down. The rupee-dollar equation has also changed since then. But for me, the Indian markets are not cheap enough for me to start buying. I think that the Indian markets can go down another 20 per cent from here.

 

What could be the key triggers for a correction in Indian markets?

 

I think the earnings will begin to disappoint and have a bearing on the market sentiment. We have also to be aware that markets nowadays are driven by global liquidity, which is still growing, but at a slower rate than it used to. All this will impact the Indian stock markets going ahead.

 

How are global financial markets reacting to developments in West Asia?

 

The Asian markets are okay. Some are very speculative and high, like South Korea and Taiwan. But they are not driven by all stocks. Instead, they are driven by a handful of stocks.

 

The Korean market is driven by two or three stocks, which make up more than half the market capitalisation—SK Hynix and Samsung Electronics. The same is true for Taiwan. Taiwan Semiconductor is by far the largest company.

 

So if you look at the index, it doesn't tell you what the typical stock is doing. It tells you what technology stocks, AI-related stocks and semiconductor stocks are doing.

 

How do you see global central banks responding to the situation?

 

They will try, of course, to print money and they may do it. As you know, in the US they started to cut short-term rates in October 2024. What happened to the bond market and long-term rates? They went up.

 

The US Fed and other central banks have limited power. They can cut interest rates and ease monetary conditions and maybe stocks will go up. But they will go down, in my opinion, in inflation-adjusted terms. It's like the Indian market. In dollar terms, it is down much more than in rupee terms.

 

What's your view on gold, silver and crude oil?

 

I'm basically positive about precious metals. We had a strong rally from 2024 to the beginning of 2026. Now we're in a correction phase and, in my view, this correction phase is not yet over. We are likely to still go lower. Longer term, I think people should own some precious metals.

 

On crude oil, I don't think it is that expensive at the present time. It had a huge move and then corrected. The solution to the Iran conflict is very complex and it will take time. In my view, oil prices will rather go up than down.

 

What would be your advice to investors at the current juncture?

 

At a time when everybody wants to speculate and everybody thinks that his assets, stocks or properties will go up in value, my advice is to hold some cash. People don't realise that markets—including real estate, stocks, collectibles and fine wines—are highly vulnerable. If they go down, they can go down a lot.

 

So, over the next six months, do you expect most asset classes to go down?

 

It could be six months, nine months or three months. But at the present time, I think there is more risk on the downside than upside potential.

 

Which markets could be relatively insulated or fall less?

 

Some markets have already come down a lot and may hold up better than others. But it would be a fallacy to think that markets will go up if the US goes down by 30 or 50 per cent. As a measure of precaution, investors should hold an unusually large position in cash and possibly bonds. I own a bond portfolio because it may not be a great investment, but it could be a better investment than a stock portfolio that drops 30 per cent.

 

Are we in for K-shaped returns where developed markets – and those who have artificial intelligence (AI)-related stocks – gain at the cost of emerging markets?

 

In a bubble, it is very difficult to point to a stock and say today is the top. If I look at AI-related stocks and semiconductors and the biggest market-cap stocks in America like Nvidia, Apple and Microsoft, usually—and there may be exceptions—but usually, as was the case in 1929, in 1973, in 1980 with oil stocks, in 2000 with technology stocks and in 2007 with home builders and subprime lenders, and also in Japan in 1989, when the most popular sector peaks out, afterwards the most popular stocks decline by at least 70 per cent.

 

If you buy Nvidia or Micron today, maybe the stocks go up another 20 per cent. That is possible. But afterwards they will go down a lot, and that is a risk I don't want to take. Some people think they will buy the stock and sell before it collapses. Usually these people lose a lot of money because they forget to sell or the selloff is unexpected.

 

What's your view on a potential SpaceX IPO and listing?

 

I have no view except that valuations are very high. They are not bargain valuations that would interest me in investing in that company.