What the sell-off is really telling us?

 Asian markets are witnessing a sharp sell-off, with South Korea’s KOSPI plunging over 8% and triggering a 20-minute trading halt. Japan’s Nikkei declined more than 4%, while Taiwan’s TAIEX dropped 3.41%.  Over $900 BILLION has been wiped out from Asian stocks. Higher US inflation data fueled fears of more Fed rate hikes and triggered a broad sell-off across Asian markets. The Chip is blowing off. Don’t get surprised if Indian markets make new highs. Flows are getting shifted and can happen at any point in time.

Here are the key factors driving the market turmoil:

Memory Chip Oversupply Fears Are Building

The global memory chip industry is booming, with supply constraints supporting high prices and strong corporate profits. However, a column in South Korea’s Maeil Business Newspaper warns that the cycle could reverse as early as 2029 when new production capacity comes online.

The concern is straightforward: rising supply could push chip prices lower, compress margins and weaken earnings. South Korea may have just two to three years to diversify and build new growth engines before the current semiconductor boom potentially loses momentum.

China’s Expanding Chip Capacity Adds to the Pressure

Elon Musk added fuel to the debate with his statement: “China will be making a LOT of RAM in 2028.” China has built massive capacity in older process nodes, leading to local gluts, price pressure, and some dumping concerns in those segments. Spot markets (e.g., Shenzhen’s Huaqiangbei) saw sharp drops in certain DDR4 prices after a speculative run-up, but this does not reflect the overall advanced-chip market.

China’s CXMT reportedly plans to increase monthly wafer capacity from 350,000 by the end of 2026 to 500,000 by the end of 2028. Morgan Stanley estimates that China could account for 30% of new global DRAM capacity by 2028.

For investors, the concern is not just about current supply, but the possibility that aggressive capacity expansion could bring forward the next industry downturn. The sell-off is more about anticipated risks and profit-taking after a huge AI-driven rally than current oversupply.

Asian memory names look cheap on earnings (and have low PEGs) but carry high cyclical risk. US design/foundry names (Nvidia, TSMC, Broadcom) trade at more moderate-to-premium multiples justified by growth durability in the bull case.

 

Advantage India:

India continues to show solid GDP growth, healthy bank balance sheets, rising domestic institutional (DII) and retail SIP inflows that help absorb selling pressure, and themes like capex, manufacturing, and consumption. A global AI cooling does not remove these drivers and can make them relatively more appealing to allocators seeking non-AI-dependent growth.

AI correction reduces the opportunity cost of holding India (by cooling the main competing trade), improves relative valuations and ownership levels, and highlights India’s more diversified, domestically driven growth profile.

 Conclusion:

The sharp decline in Asian markets reminds us that even powerful structural themes such as AI can face severe corrections when expectations, valuations, and financing conditions change simultaneously.

The decisive question is not whether AI demand will disappear. It is whether future demand and earnings growth will justify the prices investors have been paying—and whether expanding capacity will erode the extraordinary profits currently enjoyed by semiconductor manufacturers. The ongoing sell-off (especially hard in Korea) has already reduced many multiples. Goldman and others note partial de-rating has already occurred. Further compression is possible if AI capex slows or rates stay high; re-rating is possible if demand proves durable.

A correction can create opportunities, but falling prices alone do not establish value. Investors should assess earnings durability, balance-sheet strength, competitive positioning and valuation before treating the sell-off as a buying opportunity.

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FII's will not come back in large Cap

We are only focusing on the fact that FIIs are selling and are not interested towards India. FII’s have been selling aggressively, and DII’s are buying at the same speed. That is one of the major reasons why the Indian markets did not correct massively as compared to previous FII selling. Analysing the data helps to understand what we are missing from this massive FII selling. They knew interest rates hikes are coming and hence rebalancing is an art for equity investment and they executed.

FII’s are selling large caps, which used to be one of the most preferred segments for them to allocate to. But why are they selling large caps? The reason is that large caps have invested nothing in gross asset formation, which gives projections for future revenues and earnings. Large caps have just enjoyed wealth creation for shareholders, dividends and exorbitant CEO and senior management compensation.  This has become a grey area where the Indian IT industry also lost its position.

If we dig further, we find that FII selling happened more aggressively in counters ike Financial Services, followed by Oil, Gas & Consumable Fuels, which witnessed selling of approximately ₹6,854 crore, and Automobiles & Auto Components, which saw an outflow of around ₹6,212 crore out of the total redemption of Rs ₹35,861 crore in the month of September 2026. Together, these three sectors accounted for approximately ₹26,213 crore, or nearly 73% of the total FPI equity outflow during September.

We have been saying very clearly that FIIs are looking for earnings, and they are not getting the same in large caps, and more reflection is on the mid-cap and small-cap space. The depth of the selling by the FIIs was 14 out of 23 sectors recorded net selling during the month.

Now the biggest question in mind is where FIIs are looking forward. They are investing in Consumer Services, which emerged as the largest recipient of FPI buying, attracting approximately ₹2,333 crore. This was followed closely by Services, which received around ₹2,302 crore, and Healthcare, which attracted approximately ₹2,117 crore. Construction also received meaningful foreign investment, with net buying of around ₹1,311 crore.  FPIs recorded a net debt outflow of approximately ₹20,727 crore during September. They just knew the rate-hike climate is about to begin.

But wait, does this mean FIIs don’t like the sectors which they sold off, or is further sell-off awaited?

Financial services continue to represent one of the largest areas of foreign ownership in India. FPI holdings in financial services were approximately US$208.5 billion as of September 2026, representing roughly 30% of total Indian equity assets held by FPIs. Total FPI equity assets under custody were estimated at approximately US$689.4 billion. This analysis helps to understand that FIIs are not exiting the sector but are just profit-taking, rebalancing and have some concerns about valuations.

FIIs ’ selling is a half-hearted truth, misrepresented and wrongly understood. The pattern of FII’s buying and selling shows they are concerned with one question on their minds - Where can earnings growth remain resilient, and where could valuations or macroeconomic conditions create greater downside risk?

Don’t forget FII’s are in their last quarter, and profit booking is bound to happen, and they have lots of issues awaiting to be managed during this hard winter. Hence, profit booking and rebalancing is normal.

For an Indian investor, the key takeaway is therefore not simply that “FIIs are selling.” The more meaningful question is what they are selling, what they are buying, and why. The September data points to a market where sector selection is becoming increasingly important.

Don’t focus on where FII’s are buying but on where capital is moving, which sectors are seeing sustained demand, and whether the underlying fundamentals justify those flows.

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What is concerning market & what we are ignoring? Series -1

 

Things have already become expensive, and this festive season and the global winter will both will be on the expensive side. This year the clearance sell might be expensive sell and may not find many buyers. Home appliance makers hike prices ahead of festive season amid raw-material cost pressure.   The 7.1 % GDP expectation seems difficult.

The industry is facing higher prices for:

• Copper- +56% YoY
• Aluminium- +40% YoY
• Steel
• Crude-oil derivatives
• Freight/logistics

Currency movements are also adding to the cost pressure. Leading manufacturers (including Blue Star, Godrej, Haier, Daikin, LG, and others) have raised or announced hikes of 5–8% on air conditioners and roughly 3–4% (or higher in some cases) on LED TVs, refrigerators, washing machines, and similar products, effective from around 1 October.

This is significant because these commodities form an important portion of the cost structure of air-conditioners, refrigerators, washing machines, televisions, wires and other electrical products. Older inventory may cushion some early festive deals, but post-Diwali prices are expected to reflect the new levels more fully. Inflation will increase and with the fear of EL NINO which was got strong grip in the Indian ocean and the current El Niño is rapidly strengthening toward a peak around late 2026 and is projected to persist through February 2027. Crops will become more expensive which will force one more hike before March 2027.

 Those did not pass the price hikes of raw material we will find pressure in profit margins in 3^rd quarter and some part of it in 2^nd quarter results too.

Post Diwali you will significant pull back in demand and consumption. India’s retail CPI inflation stood at 4.82% in August 2026 (with food inflation higher), and the RBI has raised its FY27 projection to 5.2%, expecting a further rise into the December quarter partly due to food and fuel pressures. A recent repo rate hike reflects these concerns. The biggest question is that of cost pressure remains the same which is expected very much then headline inflation will force India to go for another rate hike before March 2027.

In the global context you will find this winter to be an expensive winter where energy cost will drive inflation making many countries to be uncomfortable. Now those who are expecting that Mr. Trump will loose the mid-term election and things will become easier, that is never going to happen and the market will not get a relief. His loss of mid-term will lead to more fiasco and pressure rather getting the matter resolved.  As the winter become more expensive for developing economies we will witness FED hikes in coming months.

Loan products becomes costlier followed with slowdown in hiring which leads to some setback in consumption. Most affected on a typical ₹50 lakh loan for 25 years at ~7.5%, the EMI could rise by roughly ₹817 per month if the full 25 bps is passed on (to ~7.75%). On the hiring side we find that over the full tenure this adds about ₹2.45 lakh in extra interest. For a 30-year loan the monthly increase is in a similar range (around ₹850–870 depending on the bank).

Freshers are facing a tougher environment.

The market is becoming more favourable to experienced professionals:

• Fresher hiring: +1%
• 4–7 years: -2%
• 8–12 years: +5%
• 13–16 years: +7%
• 16+ years: +5% Naukri

That is a meaningful signal: companies appear more willing to pay for immediately productive, specialised talent than to build large entry-level teams.

Conclusion:

Now the 7.1% GDP is unlikely to be achieved when the consumption slowdown is going to kick in. We don’t have a strong industrial consumption and rate-sensitive sectors will slowdown in spending. Elevated oil prices, geopolitical tensions (West Asia), and tighter global financial conditions could weigh on exports, the current account, and input costs.

EIA estimates roughly a 4% increase in electricity expenditure, with the West potentially seeing a 9% increase because of colder weather. The ECB has already highlighted that higher energy prices are eroding real disposable income and weakening consumer sentiment, with household consumption growth expected to slow.

Think about the global consumer chain:

Higher commodity prices

→ higher manufacturing costs

→ higher appliance prices 

At the same time:

Higher energy bills in developed markets

→ lower household disposable income

→ weaker discretionary spending

The 7.1% seems unlikely and we will witness cut in budgets and slow down in consumption in rural India as inflation bites the wallet of people. 6.5 % to 6.8% is much acceptable to project rather having a far flung hope. The Irony is that Indian markets are becoming more attractive and mid-small cap space is going to become more mouthwatering. This is an opportunity to invest with strong mindset of long term wealth creation. The Iran war might come to an surprise end at any point of time before March 2027 that will give a huge spike to market. Hence the current situation is an opportunity which needs to be taken into consideration and not to become fearful in terms of investing.

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Which sector look scary and which one promising?

One of the biggest questions being asked is which sectors will be growing in the next 5 years and where to focus now.  In the next 5  years, we will witness new sectors coming up that are now in the nascent stage of growth and limited to a few sectors, but will soon be one of the key GDP growth contributors in the coming years. As an investor and MFD, it is very important to know the fast-changing dynamics of the various industries across the globe and similar opportunities coming up in India. The Index might not have many of these industrial consumption stocks, but they will soon have higher weightage in the next 5 years. But what is changing, and how fast, is that the new sectors of industrial consumption are getting a hold of the GDP growth of different countries, shifting from consumer consumption. Why is global exposure in investments important, and where should you invest?

Global consumption is slowing down, but GDPs are growing. Looking at advanced economies recently, we see a pattern: higher energy costs, weaker labour-force growth, and declining savings constrain spending. From the U.S. to Europe to China, we find slow real-income growth and cautious households limiting demand.  For example, in China, soft household demand and declining fixed-asset investment are weighing on domestic activity, despite strong exports. With interest rates going up, the slowdown will be more visible. Trade uncertainty, geopolitical risks and weaker labour-market expectations tend to delay big-ticket purchases.

Be prepared to witness defaults in consumer loan products in different countries when interest rates go up. Job uncertainty and job losses will amplify the slowdown of retail consumption.  On the other hand, the Gen Z community across the globe is jobless, and they are dependent on their parents; furthermore, many have picked up household jobs for pocket money. This is scary, and focusing on retail consumption is a nightmare.

One of the key differences being witnessed in consumption patterns is that higher-income consumers and services spending remain more resilient; lower-income and goods-oriented consumption is under greater pressure. Job loss and changes in the dynamics of various industries due to AI and rising interest rates lead to a slowdown in retail consumption.

Businesses dependent on global discretionary goods are slowing down as job uncertainty, war-related price hikes and now the cherry on the cake of higher interest rates make things more difficult.

Europe faces a tougher setup because its growth momentum is already low, energy costs have increased, and household confidence is more fragile. The OECD expects euro-area GDP growth of only 1.0% in both 2026 and 2027. Surveys show rising job insecurity perceptions in places like the UK (highest since early 2023 in some measures), correlating with weaker appetite for major purchases and softer consumer sentiment. In the US, confidence has slid partly due to job and inflation worries, though high-income households (supported by wealth effects) have often kept aggregate spending from falling outright.

Among all these, how come the GDP of these countries are able to survive, and from where will these developed economies get growth?

Industrial consumption is driving GDP growth across the globe. For example, in China, technology manufacturing and exports support factories, but weak domestic consumption and property activity restrain broad industrial demand. The trade war has created a move toward independence in manufacturing, China+1” sourcing and regionalisation are attracting investment into electronics, autos, components, textiles and contract manufacturing in selected Asian economies.

The energy transition due to the war has created immense opportunity. Renewable equipment, grid investment, batteries, EV supply chains and critical minerals are creating incremental industrial demand.

 Industrial consumption in developing economies is growing rather than contracting, with emerging Asia clearly leading.

The mining industry is also driving significant industrial consumption. Saudi Arabia, UAE, Qatar, Russia, Australia, Indonesia, and many African & Latin American oil/mineral exporters (e.g., Guyana, Libya) now have a high level of mining activity and industrial demand.

China (world’s largest), Germany, South Korea, Japan, India, Vietnam, Mexico, and Indonesia are processing raw materials into finished goods (electronics, autos, chemicals, machinery, textiles, food processing, semiconductors). High multiplier effects (supply chains, tech upgrading, exports); often the biggest industrial contributor.

Industry (including construction) typically accounts for 15–25% of GDP (e.g., Germany ~23–25%, US ~18–19%, UK/France lower ~16–18%).

AI-related industrial consumption is a huge opportunity, and many countries are going ahead aggressively racing ahead. From real estate to capital goods, all sectors are going ahead to achieve huge growth in the coming years. Forecast to reach about $2.7 trillion in 2026, up ~49–50% from 2025 (Gartner). Infrastructure accounts for the majority (around $1.5 trillion, or more than half).  Data centre capital expenditure (capex)  is expected to be around $ 800 billion annually in 2026, rising toward $1.1 trillion by 2030 and $1.8 trillion by 2050. Cumulative global data center/AI infrastructure investment through 2050 is projected at $31.6 trillion in a central scenario.

Strong AI-driven demand is pushing the overall semiconductor market past $1 trillion in 2026, with data-centre chips and memory (especially HBM) seeing explosive growth. Wafer fab equipment sales are forecast to rise sharply (e.g., +24% in some 2026 projections).

So today it's clear that there is a significant shift happening aggressively. Global growth slowed in the first half of 2026, but has remained more resilient than expected because investment—especially in technology—has partly offset slower real-income growth and consumer spending.

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Should I invest now or Redeem?

What does this correction in the market mean? Will you invest in the current market, or will you stay outside it? Cheaper: Nifty PE at 19.56 is ~11% below the 5-year median; PB at 2.80 is ~21% below the historical median. But is this enough to invest?

Well, the current market is an opportunity, but it takes enough guts to invest after waiting for two years with a saddled existing investment portfolio with negligible returns.  Going forward, the test of mindset will be more important than just a plain vanilla game of investing and doing redemptions.

First, take it for granted: as long as Mr Donald is at the helm, get ready to be surprised. Every downfall is an opportunity. Don’t bury your head behind valuations. Since the one that is overvalued one day is the most undervalued. Hence, valuation is decided by Trump mind and not by any numbers. Those who are daydreaming that Nifty will be below 20000, well, stop daydreaming and stop making such calculations, which are just going to result in loss of investment opportunity. No one could time the market, hence don't try to reinvent the wheel.

This festive season, you will witness slow growth in consumption since prices have already gone up or are about to be expensive; hence, savings will grow, and buying will be less.

People might look to invest rather than spend in this festive season. Deferred buying would lead to a slowdown in manufacturing and lower imports. Financial services that are based on the lending vertical will find slower growth in the medium term, but that does not mean the companies are bad. Their earnings might decline, but not the long-term value proposition of the companies.  

Does this war break the Indian economy? No, India might face some headwinds, but the underlying fundamentals are strong enough. An interest rate hike is on the way, and the market has already discounted the same, but not two hikes within 6 months. So be ready for costly loans and a slowdown in loan-driven consumption products.

Quarterly results might be weak, but it's not the doomsday. Invest based on quality and not return-biased.  Quality is coming to your door asking for investments from you, so be open. Small and midcap will surprise with earnings growth, as exports to other countries will generate revenue.  

Avoid the herd and listen less to other people, and follow your financial advisor with more than a decade of experience, since they have ridden the different cycles of the market.

U.S. bond yields will rise since their papers are less lucrative compared to the rest of the world, which makes them less attractive and more demanding for those who are going to invest. This unrest is now the norm, even at different stages of any policy to bring down the yields.

You are not a bond trader nor an FII; hence, be least bothered about them and focus on your goals and asset allocation. Large caps will become cheap, but they midcap and small-cap will be mouthwatering.  Many will say large caps give comfort. Remember, comfort does not give you wealth creation nor alpha over inflation.

Hence, long-term wealth is created by buying low and selling high and thanks to Mr Trump for creating that opportunity.  Don’t try to become a financial advisor and remain only an investor. Every cheap and every correction does not convert you into a financial advisor, since cheap might be cheapest. Avoid overleveraging. Yes, don’t go for leverage trading options in this uncertain and whimsical, mindset-driven market of Mr Donald.  You might lose your house and family just for becoming quick rich using leverage models of investing.

 

Why Invest in India now? Since it is now cheaper than other countries.

 

How strong is India?

India's real GDP grew at 8.2% in Q2 FY 2025–26, accelerating from 7.8% in Q1 and 7.4% in Q4 of the previous fiscal. For the full FY 2025–26, real GDP growth is estimated at 7.7%, with nominal GDP expanding at 8.9%.

India's foreign exchange reserves have climbed to an all-time high of $729.33 billion (week ended August 21, 2026), up from $668 billion at end of March 2025. This surge was bolstered by $136.38 billion in foreign inflows through special schemes, strengthening the country's ability to defend the rupee against external shocks. Reserves stood at $707 billion as of August 7, 2026, providing a substantial buffer.

The general government fiscal deficit was brought down to 7.4% of GDP as part of ongoing consolidation efforts. For FY 2026, the fiscal deficit came in at 97.5% of the Revised Estimates, indicating disciplined expenditure management.

Conclusion:

Smallcap earnings grew 35% YoY in Q1 FY27, compared to just 11% for Nifty 50 companies. For FY 2026–28, estimated two-year forward CAGR is 20% for smallcaps vs. 13% for large-caps. Production Linked Incentive (PLI) schemes are a game-changer for midcap and smallcap manufacturers. 14 key sectors are covered, with an approved outlay of ₹1.91 lakh cr.  PLI schemes target medium and large manufacturers, but the supply chain benefits cascade down to smaller ancillary units.  

This is where the growth comes from: sectors like electronics, textiles, auto components, speciality chemicals, and capital goods—where midcaps and smallcaps dominate—are seeing disproportionate benefits. Midcaps and smallcaps often dominate niche segments with limited large-cap competition, allowing them to capture pricing power and market share. Many midcaps/smallcaps operate in under-penetrated sectors (speciality chemicals, EMS, diagnostics, niche engineering) with long growth runways. So it's time to shop, but before that, you need to adjust your expectations since this is going to be a roller coaster ride as long as Mr. Donald is in the seat. Returns will come stupendous provided you have the right place, at the right time and with the right people. This last part is the missing part where you need your financial advisor by your side. In these markets, investments need more clarity on the downside to create a strong mindset for investing and to take advantage of the current weakness of the global markets.

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Do you know how wealth is created? Do you have a review log?

Do you know how wealth is created?  Not just by investing in the top 10 funds, since that list changes every 2 years.  For the last 2 years, you have been crying that returns are not being generated on the investments, but do you know that it's due to you and not due to the market? 

Wealth is always created by a review mechanism and by asking the right questions. But here too, the definition of the right question is poorly defined and cannot be framed at all. Still, at best, one can go through the same key factors below to be asked while you do the review of your investment portfolio. Do you have a review log? 

The traditional checklist approach, while practical, often misses the narrative thread that connects each investment to the life it is meant to support.

Move ahead of simple returns: The XIRR (Extended Internal Rate of Return) is the appropriate lens for portfolios with multiple cash flows—SIPs, withdrawals, or additional contributions—because it accounts for the timing and size of each transaction. CAGR, by contrast, assumes a single lump-sum investment and is better suited for evaluating fund manager performance over fixed periods. The outcome of this review is that a robust review tracks XIRR across 3-year, 5-year, and 10-year horizons, comparing each against the relevant benchmark. This multi-period view smooths out short-term volatility and reveals whether the portfolio is truly compounding in line with expectations.

The Discipline of Allocation: Drift and Rebalancing: When to rebalance? Often, it has been found that wealth and profit are lost when rebalancing is not exercised. You may call it greed, but in mathematical terms, it is defined as rebalancing an overbought portfolio. If we don’t rebalance, we increase the risk of the investment portfolio ourselves, and later we blame the market. The market did not stop you from rebalancing; it was the greed and the missing policy framework for rebalancing. This 5% rule is not arbitrary; it represents a balance between maintaining risk control and minimising transaction costs.

The Gen Z community lacks Vision in terms of investments: A portfolio without goal mapping is a collection of assets without a story. Mapping investments to specific goals—retirement, a child’s education, a home purchase—creates a clear time horizon and risk tolerance for each bucket.  This generation is the best since they have clarity regarding what they want to do in life and demand work-life balance, but when it comes to investments, they lack clarity big time. Before goal planning comes clarity on investment gains and their long-term vision.

Blind investments lead to overlapping underlying securities across investments: Why did returns not come in the last 2 years in most investment portfolios? Overlapping securities, categories, themes, and, most importantly, a lack of vision when making investments.  The example of don’t put all your eggs in one basket " has been misunderstood with the change of time. Many investors made money in the last 2 years, but you did not, since you invested blindly. Too many NFO investments, too many innovation, defence, etc., thematic investments have been the perfect example of overlapping underlined securities.

Fund returns don’t justify the fund's quality: Returns alone are a dangerously incomplete measure of fund quality. Just betting on past returns won't get you to wealth creation. You need to explore and deep-dive into a new fund house, understand its philosophy, fund structure, ratios, and stock portfolio reviews.

Conclusion: The Review as a Living Practice

Creating a review log is very important to keep a memory of the good and bad decisions made and to avoid those traps and identify the opportunities in coming years. It's a documented process where you identify the journey of your investments through the different market cycles and the decisions taken on the same.

The portfolio review is not an annual chore but a living practice—a recurring conversation between your financial reality and your life’s aspirations. It requires both the precision of a surgeon and the wisdom of a philosopher. When done well, it transforms a collection of investments into a coherent strategy, aligned with who you are and who you intend to become. The biggest mistake of financial planning and review is just being focused on what you got in past returns and not on what you will get in the coming years.  This is the place where most portfolios have been stuck for the past 2 years, where investors complain about returns not being made on the investments. Portfolio review is the moment when scattered investments, market noise, and life’s unpredictability are brought into alignment with your deepest financial intentions.

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Transformation Opportunity of the Mutual Fund Distribution & Distributors

The financial sector is going through huge changes and bringing new sets of product and distribution opportunities for distributors, wealth platforms and investors too. India is now getting into Ease of Doing Financial Investments and Product Innovations- thanks, SEBI. We will find many wealth firms getting into the space and more business growth in the coming years. Private equity flows will now chase more wealth firms, and the golden era is about to begin.

It's time for small MFDs and mid-sized ones to think about and explore becoming mid-sized wealth outfits.  In the coming years, the number of wealth firms and advisory firms will grow stupendously in India, which will change the landscape of investments.  Further, with AI adoption, portfolio evaluation and recommendation will give significant momentum to these products. The time has come when mutual fund advisors will become portfolio managers, creating new wealth outfits. The slow growth of the SEBI-registered investment advisors (RIAs) will grow under the PRIM model. This will give birth to many wealth firms like Dezerv in the coming years.

The most important opportunity may ultimately be the creation of a larger and more sophisticated Indian capital-market ecosystem.

SEBI is making significant changes in the Indian financial market, creating new opportunities that align with global market trends. The recent FCNR collection proves the whole world is now favouring India.

Taken together, these measures point towards a capital market that is becoming broader in product choice, more flexible for intermediaries, more accessible to sophisticated investors and more structured in investor protection.

One of the most consequential changes is the overhaul of the PMS framework. The proposed Portfolio Managers Regulations, 2026 create greater flexibility around investment avenues, including IPOs, primary debt issues and specified foreign securities. Discretionary PMS would also be able to invest, subject to conditions and client consent, in eligible unlisted investment-grade debt.

More importantly, the introduction of the Portfolio Managers Route for Investing in Mutual Fund units (PRIM) creates a more explicit bridge between PMS and professionally managed pooled investment products. The ability to access direct mutual-fund plans, ETFs, index funds and SIFs through this framework could encourage portfolio managers to think beyond the traditional direct-equity PMS model

A new PRIM – Portfolio Managers Route for Investing in Mutual Fund units allows PMS to invest in direct MF plans, ETFs, index funds and SIFs—minimum PRIM ticket: ₹25 lakh. New Independent Fund Manager (IFM) framework introduced. Many larger MFDs have already launched a PMS model, which is essentially a replica of a model portfolio based on asset allocation created around 2010. The PRIM is the large modified version of the same. The AUM of this product will grow stupendously in the coming years. The size of the PMS industry as a whole will grow, but this will revamp the structure of the Indian mutual fund industry in the coming years.   The size of the MF Industry will double in the next 5 to 8 years and will not require a decade.

The Indian investor is increasingly moving from a simple product-purchase model towards an asset-allocation and solutions model. PMS, mutual funds, SIFs, AIFs and other alternatives can increasingly become components of a broader portfolio rather than isolated products.

The result could be greater innovation in PRIM portfolios and in PMS products. More than that, we will find significant innovation in the mutual fund industry.

• Multi-asset portfolios
• Goal-based wealth management
• Tax-efficient portfolio construction
• Equity and alternative strategies
• ETF and index-based solutions
• Bespoke HNI portfolios
• PMS–MF–SIF integrated solutions
• Family-office investment architecture

The introduction of an Independent Fund Manager framework adds another potential layer of professionalisation to this ecosystem.

SEBI's decision to make accreditation easier, including allowing AIF managers, AMCs offering SIFs and PMS providers to undertake manager-led accreditation, could reduce friction in accessing sophisticated investment products. The revised securities-market exposure criteria and treatment of non-residents, including FPIs, further broaden the framework.

FPI Participation in Commodity Derivatives: Allowed Foreign Portfolio Investors (FPIs) will have access to additional non-agricultural commodity derivatives, subject to strict cash-settlement/non-physical delivery conditions. This will attract huge inflows from NRI and global investors, increasing the penetration of the commodity market.

REITs & InvITs Get Greater Flexibility: REITs and InvITs can now issue Depository Receipts in GIFT City to tap foreign capital, while voting norms have been eased by shifting the 75% approval threshold from total unitholders to votes actually cast. This is big thing where AI-related data centres and these products will need capital, and REITs & InvITs will play a huge role in making it more attractive.

India does not merely need more capital. It needs better intermediation of capital—connecting household savings, HNI wealth, institutional capital and global money with productive businesses and long-term economic opportunities.

The September 2026 reforms potentially support that process by expanding the toolkit available to professional investors and asset managers while reducing unnecessary regulatory friction. We are moving away from sales-based advisory to advisory-based sales with more products. It's a total overhaul of the distribution industry, along with growth for new manufacturers. 

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Sept 24th 2026 will be Remembered -SEBI new rules Transform Indian capital market opportunities

Taken together, these measures point towards a capital market that is becoming broader in product choice, more flexible for intermediaries, more accessible to sophisticated investors and more structured in investor protection.

1. Portfolio Management Services (PMS) Overhaul

• New Regulations: The Portfolio Managers Regulations, 2026 replace the 2020 framework.
• Asset Allocation Flexibility: Discretionary PMS can invest in IPOs, primary debt, specified foreign securities, and up to 10% of client AUM in eligible unlisted investment-grade debt (with client consent).
• Derivatives Limit: Exchange-traded derivatives allowed up to 1.25× client AUM.
• PRIM Route: Introduced the Portfolio Managers Route for Investing in Mutual Fund units (PRIM), allowing investments in direct MF plans, ETFs, index funds, and Specialized Investment Funds (SIFs) with a minimum ticket size of ₹25 lakh.
• Governance: Introduced an Independent Fund Manager (IFM) framework alongside simplified compliance requirements.

2. Accredited Investor (AI) Framework Easing

• Manager-Led Accreditation: AIF managers, AMCs offering SIFs, and PMS providers can now conduct manager-led accreditation.
• New Exposure Criteria: Securities-market exposure criteria fixed at ₹5 crore for individuals/HUFs/family trusts/sole proprietors, and ₹20 crore for body corporates/trusts.
• Deemed Accreditation: Non-residents and FPIs are deemed Accredited Investors. Accreditation validity extended to 3 years.

3. Uniform Asset Protection Across AIF Structures

• Standardized asset ring-fencing rules across all legal structures (Trusts, LLPs, Companies, and Body Corporates).
• Explicitly prohibits using fund assets to cover losses, damages, or operational expenses belonging to the fund manager.

4. Common Advertisement Code

• Replaces fragmented marketing rules with a single Advertisement Code across MFs/AMCs, PMS, Investment Advisers, and Research Analysts.
• Celebrity Endorsements: Permitted strictly for entity/brand-level promotion with prior regulatory approval and safeguards.
• Approval & Reporting: Prior ad approval eliminated for general ads; mandatory reporting within 3 working days required.
• Clear Categorization: Explicitly separates formal advertisements from routine client communications.

5. Formula-Based Settlement Mechanism

• Standardized, formulaic calculation for settlement amounts based on case severity, regulatory precedent, and aggravating/mitigating factors.
• Offers extended application windows, fast-track routing for minor cases, and a platform to resolve long-pending enforcement actions.

6. Call Recording Relief for Research Analysts

• Removed the mandatory requirement for Research Analysts to maintain call recordings of conversations with institutional clients.

7. Expansion of Vault Manager Regulations

• Broadened the scope of Vault Manager rules beyond Gold Exchange Receipts (EGRs) to cover gold/silver ETFs and bullion derivatives.
• Net worth requirement for Vault Managers increased from ₹50 crore to ₹75 crore, alongside enhanced security protocols.

8. FPI Participation in Commodity Derivatives

• Allowed Foreign Portfolio Investors (FPIs) access to additional non-agricultural commodity derivatives, subject to strict cash-settlement/non-physical delivery conditions.

9. Structural & Voting Flexibility for REITs / InvITs

• GIFT City Issuances: REITs and InvITs can issue Depository Receipts in IFSC/GIFT City to access foreign capital.
• Voting Thresholds: Eased voting requirements by changing the decision threshold from 75% of total unitholders to 75% of votes cast.

10. Non-Convertible Debenture (NCD) Listing Rules Eased

• First-time NCD issuers are now required to list only future debt issuances, removing the requirement to retrospectively list existing unlisted NCDs.

11. Relaxation of Professional Certification Norms

• Modified timing guidelines for age and experience-based qualification exemptions.
• Expanded recognition of alternative industry courses and specified certification programs.

12. Settlement Scheme for Illiquid Stock Options (ISO)

• Launched a 4th one-time settlement scheme targeting pending enforcement cases related to non-genuine trades in BSE’s illiquid stock-options segment (April 2014 – September 2015), offering fixed settlement amounts based on contract volume.

SEBI's 24 September 2026 reforms could mark an important step in India's transition from a predominantly product-led savings market towards a deeper, more flexible and increasingly sophisticated capital-market ecosystem—one capable of connecting a much larger pool of Indian and global capital with India's long-term growth story.

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How can we believe Nifty will make new highs in FY-27?

 

Do you think Nifty will touch new highs in FY-27? How could that be possible when the global situation is tough for India? Do you think large caps will grow, or midcaps and small caps? Well, the numbers expectation is tough to think about and believe, but we have tried our best to figure out the rationale of the market to make new highs despite all the odds.

The last 7 months have been a big learning experience for the market and for the investors.  There was a time when India was being flooded with pessimism and was often compared with the Korean’s and Taiwanese stock markets and FII inflows. Investors were focusing on global investment products, and there was an euphoria for GIFT City products.  Indians were treating Indian markets as much inferior and foreign markets as much superior. Investors were spending here but were betting on AI stocks and overseas markets where they had limited knowledge. The craziness of investors discounting Indian markets' long-term growth and taking bets for short-term gains in foreign markets turned sour very soon. It's important to know what is turning on and how the Indian markets are going from slow earnings to stable earnings despite global factors.

The INR was one of the factors that kept Indian markets under pressure, but the FCNR turned out to be a big success, and on the same note, we Indians doubted why FII’s or NRIs would invest in FCNR and not in Korea, Taiwan or the S&P 500 and AI stocks. But all these assumptions turned out to be negative for the investors, and now Indian markets are back with strong earnings numbers. In my last article we wrote very clearly that FCNR is a big weapon when the returns are being calculated. Thats why Indian governmnet is now planning to close it one month before the FCNR.https://www.ianalysis.co.in/2026/06/fcnr-generates-21-to-even-27-annually.html

In the last 1 year, from 15^th August 2025 to 15^th August 2026, the index has delivered a negative return of 2% since last year to Independence Day 2026, due to geopolitical uncertainties, foreign capital outflow, and earnings growth-valuation mismatch

Nifty Midcap 150: Q1 FY27 EPS grew about 34% YoY (with over 80% of the index having reported).

Nifty Smallcap 250 / Smallcap 100: Q1 FY27 EPS grew roughly 40% YoY for the Smallcap 250. Small-cap earnings were almost flat in FY25–FY26, setting up a high percentage rebound in FY27.

A record 62.7% of companies that reported losses in Q4 FY26 turned profitable in Q1 FY27, the highest rate in six quarters. The 271 companies generated a combined profit of ₹5,973 crore, compared with a loss of ₹5,505 crore in the previous quarter.

The improvement was supported by lower expenses and higher other income, signalling a broadening recovery in corporate earnings and a positive catalyst for markets.

 What factors will drive markets to new highs?

 The PAT growth of Q1 FY-27 matches the PAT of Q3 FY-24.  Q1 FY27 results already reflect this: midcap and smallcap earnings grew ~23–34% and ~31–40% YoY respectively, well ahead of large caps, indicating operating leverage and mix benefits. This is the place where the turnaround is being noticed for the Indian markets. Analysts remain constructive on mid- and small-cap earnings leadership continuing, supported by domestic demand, selective sector strength (financials, certain industrials/discretionary), and a broadening recovery—though delivery on high expectations is key given valuations

On the 80^th Independence Day, the Indian economy and market are both stable, and the earnings outlook has recovered significantly. The Indian markets will make new highs during or after Diwali but before March 2027.  During this phase, we will complete the 2-year down phase of the market due to the low base of previous years.

We had a healthy monsoon; hence, food inflation will be on the lower side. Industrial inflation has also been controlled and is coming down from the all-time highs of May and June numbers. For example, Fuel & Power: 20.05% YoY (down sharply from 27.41% in June, but still very high).  This adds significant numbers to the PAT.

 After a couple of years of uneven rural and mass-market demand, indicators like two-wheeler sales, FMCG volume growth, and discretionary spending have started to firm up in FY26–FY27.

Permanent resolution around the Strait of Hormuz chokepoint leading Brent crude to stabilise within the $70 --$80/bbl band, directly reducing headline inflation and easing input cost pressures.

FIIs exhibited a clear preference for sectors offering either defensive earnings visibility or attractive valuations. Consumer services, healthcare and consumer durables attracted substantial inflows, reflecting confidence in India’s consumption-driven growth story.

Many companies have already passed through earlier cost increases via price hikes; as raw-material inflation moderates or stabilises, gross margins can expand even if top-line growth is moderate.

Many firms are now operating at higher utilisation, so incremental revenue flows more strongly to profits.

Recent earnings trends

• Q1 FY27:
• Nifty 50 EPS grew roughly 10–11% YoY.
• Midcap 150 EPS grew about 34% YoY.
• Smallcap 250 EPS grew around 40% YoY.

Higher sustainable growth rates and improved ROE profiles justify a higher equilibrium P/E. The above numbers do not account for the broader index rally; hence, even if the numbers might look high, it's not in a risky zone, which leaves a margin of safety and growth.

Conclusion:

The beginning of the festive season was followed by growth in consumption, which will boost operating profits. Spending levels have gone up, and there is no shortage of the same. The broader participation of stocks is still awaited; hence, the market has a high probability of making new highs.   The market is now slowly getting adopted and is neglecting the U.S -Iran war and focusing more on earnings and strategies of growth within the economy. If earnings grow at ~12–15% CAGR over the next few years, the market can absorb current valuations without needing aggressive multiple expansion. Follow your asset allocation and risk-taking ability before investing. It's time to revisit financial planning goals and realign your allocation towards equities.

Most importantly, review your risk taking ablity and if their si any adverse expectation by everyone and hard to believe the market will go up and make new highs, you should consider that while investing. 

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FCNR generates 21% to even 27% annually Return- More than Equity Returns

We are not bothered about crude prices going to $ 90 or $100 per barrel. We are not worried about an Iran–U.S. war. Yes, we are more worried about INR only, which decides the fate of the Indian economy. The market is only looking towards INR. Very soon, we will lose sight of the war and will focus on domestic growth once the INR comes down.

 Equity is always understood easily, but Debt is the larger market compared to equity. INR will come down to the range of 92 levels by H2 of FY-27. The Brahmastra used by the RBI and the Ministry of Finance is hugely effective in order to make India attractive to the NRI community. Further, the same money will be used back in the equity market at the end of 3 years. Further, once the debt inflows come, the equity will also follow its steps once the INR become 90 to 92 level. The beauty of FCNR is that it can generate equity-like USD returns (e.g., 17–27% IRR per some analyst estimates), but leverage significantly amplifies risks.

The revival of the FCNR(B) deposit swap mechanism has created significant interest among Non-Resident Indians (NRIs), as Indian banks are now offering attractive dollar-denominated returns compared with many global alternatives. This allows NRIs to potentially earn equity-like returns (over 20% in USD terms) through leverage.  At a time when investors globally are balancing safety, yield, and currency risk, India’s FCNR(B) scheme stands out as a strategic financial innovation.

NRIs can amplify returns dramatically by borrowing abroad cheaply and depositing the funds in high-yielding FCNR(B) accounts.

Example simplified:

• NRI has $1 million of their own capital.
• Borrows an additional $10 million abroad at ~4.5% for 3 years.
• Deposits total $11 million in FCNR(B) at 6%.

Consider a hypothetical example:

An investor has:

Own capital: $1 million

They borrow:

$10 million overseas at 4.5% interest from U.S Bank

The total FCNR(B) deposit becomes:

$11 million earning 6% interest

Return Calculation:

Interest earned on FCNR(B):

$11 million × 6% = $660,000

Interest cost on borrowing:

$10 million × 4.5% = $450,000

Net annual income:

$660,000 – $450,000 = $210,000

On the original $1 million capital, this represents a return of approximately 21% annually in this simplified example. With sufficient leverage and interest-rate spreads, returns could move into the 17–27% range.

This illustrates how interest-rate spreads and leverage can significantly enhance returns. However, such strategies involve additional risks, including borrowing costs, liquidity considerations, counterparty risk, and changes in market conditions.

It suits sophisticated NRIs with strong credit access, high risk tolerance, and long-term horizons who can withstand volatility. Forex reserves will grow significantly. The FCNR acts as a non-debt-creating inflow (unlike external commercial borrowings in some cases). It reduces imported inflation and improves external financing conditions. Banks will become more attractive, as deposits are often exempt from the CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio), thereby freeing up more funds for lending in the domestic economy. 

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Get ready for more redemptions and SIP stoppages

In the coming days, your clients will stop further investments, and their SIPs will face instant redemptions. Client investments will be used more for uncertain times and less for wealth creation. In fact, the study below shows very clearly that in the coming years, wealth creation by the middle class will be slower and will experience delayed growth despite the capital market giving a return of 10% to 12% in the coming years.  To what level do you manage your client, and do you restrict yourself to investments only? Iran is just a warning sign to get into good shape before it goes for a ventilator. Neither Iran nor is the end of the issue, you have AI too to displace many, many things, but we are not listening to the silence.  As a financial advisor, are you only focusing on investments of the clients and selling only NFO's? Truth is, we are selling NFO's and earning high commission from the same and not working as true advisors. This is just the perfect recipe for a long-term wealth creation crisis.

The biggest risk for Indian banks is no longer Indian corporates but household debt. In 2025, retail loans accounted for approximately ₹45,404 crore of write-offs, making them the largest contributor to banking sector write-offs for the first time.  

Another aspect that comes up is why clients are chasing past returns and investing in products and avoiding India. Instant gratification, fulfilment, and uncontrolled consumption. Everything to be achieved simultaneously without waiting.

Why India needs more savings and more retirement planning? India is a country which has is country which does not have social benefits like other countries. The requirement of retirement planning is more important in today's volatile AI-driven economy. Loss of jobs and preparation for the uncertain times bring more demand for savings growth.

But where does India stand in terms of savings and consumption? Between March 2021 and March 2026, outstanding household loans nearly doubled from ₹30.5 lakh crore to ₹69.4 lakh crore. During the same period, the share of household loans within the overall banking credit pie expanded steadily.

Data indicates that household debt as a percentage of GDP increased from approximately:

• 37% in 2021
• 39% in 2022
• 41% in 2023
• 42% in 2024
• Nearly 49% in 2025

More concerning is the pace of growth. Household debt is reportedly growing at nearly twice the rate of household incomes, creating pressure on family balance sheets. Getting more into the break-up, we find that housing loans remain the largest component of household debt, accounting for over ₹33.5 lakh crore of outstanding loans.

Household Savings Rate:

• Fell to 18.1% of GDP in FY24 (third consecutive year of decline).
• Overall household savings dropped from ~22.7% in FY21 to 18.4% in FY23.

Net Household Financial Savings (financial assets minus liabilities):

• Hit a multi-decade low of 5.0–5.3% of GDP in FY23.
• Modest recovery to ~5.1–5.2% in FY24 and around 6.0% in FY25 (preliminary).

·        Bank deposits' share in household financial savings has declined (from ~40-43% to ~35%)

A growing share of borrowing is directed toward:

• Personal loans
• Credit cards
• Consumer durable financing
• Gold loans
• Vehicle loans

 Instant gratification and consumption boom are the prime reasons behind depleting household savings and an increase in debt. Easy loans, pay later have taken full uncontrolled consumption habits of people.

All your clients' investments will face tough times where redemptions will follow, and future investments will dry up across all age brackets.

In our study, we find that the following age brackets of clients will face the problem, and further over the next 5 years to 10 years, the decline will become steep in investments, and also, past performance-based investments will become the new norm.

·        31–40 age group: Dominates the retail credit portfolio by value and outstanding balances. This is the prime earning years group with higher loan sizes (home, auto, personal).

·        Under 30 / 26–30: Drives the highest growth in new borrowers and accounts. The ≤25 and 26–30 groups contribute heavily to new-to-credit (NTC) and unsecured lending.

·        Young borrowers (under 35, especially NBFC/fintech): ~65% of borrowers in some segments (especially unsecured personal & consumer loans)

Now, as per RBI data reflected in the analysis, nearly 46% of household borrowing is consumption-oriented, compared with roughly 36% linked to asset creation and productive purposes.

The biggest risk is that all the borrowings are related to consumption and not asset creation.   Borrowing to purchase a home, fund education, or start a business can generate future economic returns. Borrowing to fund current consumption relies entirely on future income growth to support repayment. Now, any job uncertainty, business uncertainty, loss of income, hike in interest rates, etc., leads to a significant blowup of this household debt. Debt servicing crowds out investments, insurance, and long-term wealth creation. Consumption accounts for nearly 60% of India's GDP.  Debt can only support growth sustainably when incomes rise alongside it.

Now you can figure out why investments will decline in the coming years, why savings are becoming less, and retirement will be a nightmare for Indians.  Aspiration is good until the same is funded by borrowing.

So it's well clear that retirement planning plays a critical role now, followed by checks and balances on household debt. The behavioural aspect of spending budgeting has been diluted in our household's instant gratification process, creating a major problem with investments.

When the race for debt reduction and aspiration is uncontrolled, past performance-based investments become the new norm without understanding the underlying risk, which further reduces the investment's ability for the client in the long term. This process does not create wealth. Now you can relate why job changes and pay hikes have become so frequent. As a financial advisor its not only important to set the client's return expectations but also to change and guide his consumption lifestyle so as to reduce the debt burden and prepare him for wealth creation. As I said previously you work is not only to manage client investments.  Did you guide him on his expenses?

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