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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If you are only managing a client portfolio, you are doing big mistake.

  

Are you managing the psychology of the client rather than only managing investment advisory?  Are you able to understand the client's mind and his expectations? Are you able to set the client's expectations from the investigations or just follow his high expectations?   The biggest risk you as an MFD are facing is losing client relationships. Misaligned expectations lead to panic selling, churn, dissatisfaction, and damaged relationships.

New client additions have come down, and redemptions on the other side are not getting stopped. Further lump-sum investments have dried up, and clients are scared. Most of the clients are looking for global products and GFT city outbound products, making MFDs run from door to door to get knowledge about these products. SIPs have stopped at a record pace, followed by clients avoiding the tone for investing in the market despite risk, mouth-watering low valuations in many segments.  Are you able to cope with the never-ending new product requirements from the clients?

Further most of the clients are saddled with investments that have corrected from the correction that began in September 2024.  The sudden jump in demand for global investment products has scaled to around 25 to 30% in portfolios, and in many cases, it has become more than that, which is a matter of concern for long-term wealth creation. Many clients have become so aggressive that, without even knowing the underlying risk, people are investing just to chase returns blindly. A sudden belief has been constructed within the investor's mind that Indian markets will not be performing, and global markets' growth is going to be a long-term game. Indians have been discounted now by many investors, whereas we are living in India, spending in India, consuming in India, but we are investing in countries like Taiwan, the U.S., Japan and China.

The demand for complex private equity products has also come up from the HNI and UHNI client segment, and most importantly, from the 2^nd generation family offices. 2^nd generation of family offices is more inclined towards returns, and the same story boils down when retail clients also start looking for global ETFs and index funds, and even individual stocks of Taiwan or China, etc.

Why is India being discounted? Does that mean we don’t believe in Indian economic growth or its policies?  India is no longer the same country as it used to be tagged in 2011-2013. At the same time, we are not having a banking NPA of 18%, which created a huge bottleneck for the supply of liquidity within banks. We don’t have the inflation rate hovering around in double digits, nor do we have POLICY ISSUES.

If a client is investing out of India and not trusting India, then it’s a mistake of the MFD that he did not set the tone of investing before getting the same. The key to enjoying a long and successful relationship with clients is to set clear expectations from the very beginning, and then deliver on them.

Then why are clients behaving like misguided missiles seeking an opportunity to invest in those places just by chasing returns? The lack of goal planning and having a risk analysis is the key component missing while discussing investments with clients.  We often lure clients with returns and asset allocation models, but we lack discussing risk, speaking about the dark side of investments and more importantly, we don’t drive clients away from returns but to look into the source of returns.

Discussion related to risk management and how much worse the market can go is an opportunity to strengthen the client's behavioural aspects towards the return-chasing mindset. Lack of goal planning and chasing returns are two of the most damaging investing mistakes—they often go together and are especially risky when investing in global markets, where volatility, currency risk, and information gaps are higher.

The 2^nd generation of clients is knowledgeable, but as an advisor, it's a duty to outline the various downfalls of the market and also to map the investments with goal planning. Behavioural management of the client is more important than just asking blindly for investments.   Reactive behaviour is the key component that needs to be revised and updated for the clients, which will enable them to create long-term wealth. Less familiarity with foreign companies/countries increases psychological discomfort.

Did you ask the client about his investment decision leads to his  global portfolio drops 30% in a year due to currency + market combined, would he sell or hold?"

Realistic risk tolerance for international assets = the lower of your psychological comfort AND your financial ability to withstand currency + market volatility, adjusted for your time horizon. Start conservative (10%), then increase only if you've tested your emotions during a market downturn. It's well clear that emotional management is more important than investments only. "Markets will go up and down—this is normal, not a sign of failure. Your plan is designed to withstand 40% drops without derailing your goals.

In volatile times, increase contact frequency from quarterly to every few weeks to inure clients to new realities. Are we doing that?

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RBI gained from Rupee Depreciation

This might be contradictory and might be shocking too, but when an in-depth analysis of the RBI numbers is being made with historical patterns, the RBI made a significant windfall gain.

This is a sharp, mostly factually accurate critique of how RBI's forex gains from rupee depreciation fed a record surplus transfer to the government in FY26. It highlights a real accounting and distributional dynamic, though the framing as purely a "citizen loss" without offsetting factors is one-sided. Here's a breakdown.

Rupee weakness generated a fiscal windfall (~₹1.69 lakh crore forex component, enabling the big transfer) while imposing real costs on households via eroded purchasing power. It's not "free money" — it's the government (broadly) benefiting from the pain of depreciation that RBI partly managed.

 RBI crystallises gains from past reserve accumulation; the "cost" is borne via higher prices and lower real incomes.

Rupee depreciation increases the RBI's rupee-denominated value of foreign assets. This part was completely ignored, with Rupee getting hammered.

The RBI holds a large stock of foreign currency assets. When the rupee weakens against the dollar, the value of those assets rises in rupee terms.

For example:

• $100 billion at ₹85/$ = ₹8.5 lakh crore
• $100 billion at ₹96.5/$ = ₹9.65 lakh crore

The underlying dollar assets haven't changed, but their rupee value has increased.

RBI surplus is not solely an exchange-rate story

The FY26 surplus likely reflects multiple factors:

• Foreign exchange gains
• Interest earned on foreign securities
• Domestic bond income
• Liquidity operations
• Valuation adjustments
• Risk provisioning policies

On the other hand, total goods + services exports hit a record ~$860–863 billion in FY26, up ~4.2–4.6% YoY. Services exports (IT, etc.) grew strongly at ~8% to ~$418 billion, driving a services surplus of ~$214 billion. Merchandise exports were flat-to-modest (+0.9%), but a weaker rupee provided a buffer against global headwinds and tariffs. India remained the top recipient with inflows of around $120–140 billion. Depreciation boosts the rupee value of these inflows, supporting consumption in recipient households (often rural/semi-urban) and providing a stable BoP cushion. GDP growth accelerated to ~7.4–7.6% in FY26 despite external shocks. CAD narrowed to ~1% of GDP in early quarters, aided by services/remittances. Reserves remained robust (~$700 billion range). India benefited significantly from the rupee depreciation.

 RBI's forex operations can generate realised gains.

RBI transferred ₹2,86,588 crore (~₹2.87 lakh crore) to the Government of India for FY26 — a record, up from ~₹2.69 lakh crore in FY25. Gains from foreign exchange transactions rose 52% to ₹1.69 lakh crore (about $17.7 billion), forming a large chunk of the RBI's income (cited as ~39.5% in analyses). This matches the post. Significant depreciation in FY26 (around 9.5–9.9%, with reports citing ~9.85–9.88%). Specific start/end rates vary by exact dates (e.g., opening near ₹85–86 range to highs near ₹95), but the magnitude aligns.

RBI conducted heavy defence net spot dollar sales around $53 billion (record), with gross sales much higher. This involved selling dollars acquired at lower historical rates (₹81–84 range in prior years).

When the RBI sells dollars acquired at lower exchange rates and receives rupees at higher exchange rates, it can realise gains. Large intervention volumes during periods of currency stress can therefore contribute meaningfully to RBI income. A ~9.5–11% rupee depreciation in FY26 did not derail growth or cause runaway inflation, thanks to strong services exports, remittances, and policy buffers. However, it imposed visible costs amid oil shocks.

Conclusion with a Question in Mind

The real debate is not whether RBI gained from depreciation—it did. The real question is whether the economic gains accruing to exporters, remittance earners, and public finances exceeded the inflation and purchasing-power costs borne by Indian households.

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Its time for SIF Asset Allocation Models

The SIF industry has grown stupendously in the last 6 to 8 months (less than a year) to an AUM of Rs.14000 cr. The FD money, small-case-type equity products, and, most importantly, a craze among investors for some new product drive the sales of these products.  In India, it has been witnessed that whenever there is a new product in the market this is always some spark of sales growth, which happens as the maturity of the market grows the product always gets into a normal mode of growth.  The distribution industry is yet to get into full swing for the adoption of SIF, and it's just a nascent stage; much of the growth is yet to be captured in the coming days.

The SIF ecosystem has expanded rapidly to 21 funds across five categories and 13 asset management companies (AMCs), demonstrating growing acceptance among investors seeking alternative return sources beyond conventional long-only equity investing.

The Journey Through Market Turbulence. The first half of 2026 provided an ideal stress test for SIF strategies. March 2026 witnessed a severe market correction, with the Nifty 50 TRI declining by 11.3% amid foreign institutional investor outflows and a broader global risk-off environment. This was followed by a historic rebound in April 2026, when markets recovered sharply, before entering a consolidation phase in May.

If I have to split the performance of the SIF segment month wise, I would like to picture it the same as:

·       March tested downside protection.

·       April rewarded aggressive positioning.

·       May highlighted consistency and risk management.

The biggest learning we can have is diversification within the different strategies and creating basket of SIF just like asset allocation models.

Category-wise returns

Average Return

Active Asset Allocator +1.68%

Equity Ex-Top 100 +1.39%

Hybrid Long-Short +0.30%

Equity Long-Short -0.45%

The standout performers across the entire SIF universe were:

·       qSIF Active Asset Allocator (Quant) – +2.77%

·       qSIF Equity Long-Short (Quant) – +2.07%

·       qSIF Ex-Top 100 (Quant) – +1.45%

·       iSIF Ex-Top 100 (ICICI Prudential) – +1.32%

·       Dyna SIF Equity Long-Short (360 ONE) – +1.29%

A notable trend was Quant Mutual Fund's dominance, securing three of the top five positions and establishing itself as a key innovator in the SIF space. Creating an asset allocation model in SIF is the winning strategy. Remember, every investment has to ride through volatility as long as Mr Donald Trump is on the helm.

·       Arbitrage opportunities

·       Directional equity exposure

·       Fixed-income allocation

·       Dynamic risk management

Such a structure enables participation in rising markets while cushioning downside risks during corrections.

Equity Long-Short: Higher Risk, Higher Opportunity

Equity Long-Short funds remain among the most aggressive strategies in the SIF universe.

These funds attempt to generate alpha through both long and short positions, allowing managers to profit from stock selection rather than relying solely on market direction.

The category leader continues to be Quant's Equity Long-Short strategy, which has delivered:

+2.07% in May 2026

+5.65% over the last three months

+3.54% since inception

However, the category also displayed significant performance dispersion, highlighting that manager skill and risk controls remain critical determinants of success.

Well, long story short is not an easy cup of tea.

The Ex-Top 100 category focuses beyond India's largest companies, providing exposure to mid-cap and small-cap opportunities.

This category emerged as one of the strongest performers during the post-crash recovery.

A remarkable example is Quant's Ex-Top 100 strategy:

·       Fell sharply during the March correction.

·       Rebounded 15.38% in April.

·       Added another 1.45% in May.

Returned to positive territory since inception.

Active Asset Allocators: Tactical Allocation Gains Attention

The Active Asset Allocator category is quickly emerging as a compelling option for investors seeking dynamic portfolio management.

Quant's Active Asset Allocator generated an impressive 2.77% return in May and 2.73% since launch, making it the month's best-performing SIF. Meanwhile, 360 ONE's DynaSIF AAA continued its steady compounding journey with positive returns in every full month since launch.

New launches to keep an eye:

·       Active Asset Allocator strategy from ICICI Prudential.

·       Ex-Top 100 strategy from Edelweiss.

·       Hybrid Long-Short strategy from Mirae Asset.

These launches will further diversify the opportunity set available to sophisticated investors

The significant market movements between March and May illustrated the value of different SIF categories in meeting a range of investor needs, from capital preservation and tactical allocation to alpha generation and participation in emerging market trends. The market is evolving the industry will witness more new funds coming up, which will drive advisory business to new highs. Mere distribution will not work as different strategies need to be treated as a model portfolio rather than just scheme allocation.

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The Nifty rise might be a bluff and not a sustainable trust.

Balance payment of India is weak, FDI is in a declining mode, and FII’s well, we all know the number. What we don't know is not to judge the  Indian economy based on the Nifty rally, if any. India's economy and the coming days are not so easy, as the quarterly results will unfold in FY-27

Last week, the Ministry of Finance informed that they are working on some policies to bring back FII’s. Well, it's too late to bring them and offer them only taxation benefits when the internal economy of India is screwed up. Before that, we would like to draw attention towards the balance of payments and its long-term unstoppable impact.

In FY26, exports reached approximately $333 billion while imports rose to $585 billion, creating a trade deficit of about $252 billion. After accounting for net services exports and remittances, India still ran a current account deficit of about $30 billion.

The cost of financing sourcing the same is both expensive for India currently. Financing that deficit normally requires capital account support: FDI, portfolio flows, external commercial borrowings, and NRI deposits. But these flows have waned. Net foreign investment moved from a robust +$54 billion in FY24 to a marginal +$4.5 billion in FY25, and then to -$1.3 billion in FY26. In other words, the external financing that once covered large trade deficits has greatly diminished.

The depreciation of the INR is now more expensive for India in all respects.

The current trade deficit is large relative to GDP (about 8.7% in the latest print), reflecting structural import dependencies in energy, electronics, and certain capital goods. It will balloon more going ahead as INR depreciation, high cost of transportation, high crude prices, impact on demand, impact on corporate earnings and last but not least, demand for higher interest rates on foreign borrowings if any. The best way will be to increase taxes somewhere in between FY-27 on some other products.

Industrial imports are already expensive, and India has not achieved any independence in raw material production for industrial use, nor chips, or other technological products.  It is not crude on fertiliser import where the shoe is pinching for India currently. It’s now a long-term issue

Second, capital flows are volatile and can reverse quickly. Foreign investors and lenders reassess risks rapidly in response to global rate moves, geopolitical shifts, or domestic concerns. When capital inflows decline, a country with a large CAD must either attract new funding, allow its currency to depreciate, run down reserves, or cut import demand — the latter often through recessionary pain.

Coming to FII’s inflow. Well, the global investors' appetite has moved away from Indian sectors to AI-driven sectors and industries. Indian have nothing to offer in that context for the foreign investors. Further, if they invest at 96 levels of INR, then be prepared that they will exit above 100 levels of INR. Now that might sound illogical, but that’s where we are standing now. We became too blind to the gross numbers of SIP, which became an ego issue for the government of India to give a statement in parliament that FII’s are not required.  FII's have better options to invest, where they are making astronomical returns. India doesn't have those sectors and companies.

Now we have UP elections, and without that capital market support, funding is possible. Hence, reducing taxation will not attract FII’s now. It's too late. We don’t have strong earnings, and neither does the outlook look like that to develop in FY-27, hence why FII’s will come back to India? We often get carried away with gross numbers where the Net numbers are the real picture for any economy, company or business.

Indian FDI is declining. India’s gross FDI inflows remain high—around $81 billion in FY24–25—but net FDI (after accounting for outward investment by Indian firms and profit repatriation) has fallen precipitously. Official data shows net FDI dropping from $44 billion in FY20–21 to just $1 billion in FY24–25. The blame goes to Indian corporates who were not investing in India and were busy with shareholder value creation and asking only for an income tax rate cut, PLI schemes, etc., which are nothing but a burden on the Indian economy. In FY25, Indian companies invested a record $25.6 billion abroad — an 80% surge from the previous year. In 2024, outward foreign direct investment reached ₹3,25,631 crore (US$ 37.68 billion) — a nearly 17% increase

This is a crucial piece of the BoP puzzle: while India attracts strong gross FDI (~$81 billion), the net figure is thin because Indian firms are investing heavily abroad.

The Indian capital market will face tough times, and the valuation and market fall are not yet complete. We will witness more tough days in the coming months when the whole picture of the forward outlook will become real. Don’t judge India by its capital market performance. The Nifty rise might be a bluff and not a sustainable trust. Stop being a fund manager and follow your financial advisor for investing in mutual funds. Selecting stocks and making returns from the same is no longer easy, and now it needs expertise like CIOs and Fund managers. Hire a Fund manager or CIO by investing in Mutual Funds compared to direct investing in equities.

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Direct will grow at the cost of MFD's

After quite some time, I am back to pick up our pen and come up on the side of my distributors' fraternity if the Indian economy. They might be termed as advisor/mutual fund agents/brokers, but they are small and medium enterprises of the service industry that create wealth for the poor citizens of the Indian economy. The recent consultation paper of the SEBI regarding mutual funds being given instead of salary in a certain proportion would be a hugely impactful decision for the industry.  Many industry veterans and people have welcomed this consultation paper, but we beg to differ.   This is going to be a perfect recipe for RIA business growth and direct plans where MFDs will be least benefited.

In March 2026, SEBI announced measures, including a working group to review overlaps between MFDs and IAs, digital platforms for advisors, and simplified certification requirements. Unlike commission-based MFDs, RIAs operate on a fee-based model and can recommend direct mutual fund plans with lower expense ratios. The debt distribution framework similarly emphasises transparency and lower costs, which philosophically aligns with the RIA model rather than the commission-driven MFD approach. MFDs will suffer once these modes of investing and allocating mutual fund units from corporates comes into play.

In the last couple of years, we have witnessed a huge transformation in KYC related matter. By simplifying KYC formalities, documentation, and transaction execution, SEBI is effectively reducing the complexity barriers that previously made institutional intermediaries necessary. This democratisation of access allows investors to potentially bypass traditional distribution channels entirely once they become familiar with the process.

The market has been created by the MFDs, and then the same is now being transformed in such a way that traditional business will come to an end. This SME segment of the mutual fund advisors or MFDs will come to an end gradually. Currently, we are already struggling with the burden of GST and rationalisation of several AMFI ARN numbers, which is bound to get consolidated as per compliance and also new markets will stop exploring as the earnings keep coming down with TER rationalisation.

The RIA business will grow, and direct channel flow will grow, which will bring down the TER and cause these MFDs to suffer from falling income. The next generation of clients is more focused towards a self-help mode of operating, and this pattern will grow as the entry of new MFDs becomes unattractive. Now with AI coming up and this SEBI’s consultation paper speaks loudly that the MFD business is becoming risky, and this SME segment will narrow down going ahead.  The advisory models will grow for client acquisition, and the mutual fund will be a side business, and it will be more focused on new products and alternative products like PMS, AIF & SIF.

The industry size of PMS, AIF & SIF will grow steadily as the mutual fund business becomes less attractive commercially. Investors are well informed, and corporates will choose their own models of suggestion where a direct model of business will grow more. Don’t be under the assumption that in the coming days corporates will come to MFDs. That segment has a limitation, hence nothing to rejoice much. Overall, MFDs will suffer once this model of operating gets into play. This will impact Tier 2 and 3 markets more, as clients working from these places in companies will get mutual fund investment advice much better and earlier. Clients will win, but at the cost of the SME channel called Mutual Fund Distributor.

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Direct MF investors are growing ....what an IFA need to focus

The Indian mutual fund space has taken a record turnaround not only with new additions of clients' SIP amounts, but also with direct clients’ allocation.  The time has come when mutual fund advisors need to be careful about the transformation in business, which is coming up without any signal of risk as of now. It’s not the regular active funds competition with similar direct schemes. That should not be misunderstood while going through the topic of the article. We need to understand the underlying risks that might change the MFD’s business. The risk of online is growing, and now with AI, the risk goes multi-fold with TER coming down on new and old assets. MFDs need to be cautious.

Direct plans have clearly outpaced regular plans in terms of asset growth since March 2021, reflecting growing investor preference for cost-efficient mutual fund investing. In the coming years, we will find more growth for direct channels as passive industry, index funds, etf’s become a more integral part of investment decisions.

The compounded annual growth rate (CAGR) in average assets under management (AAUM) for direct investors stands at 21.74%, higher than the 18.13% CAGR for regular investors over the same period. Regular plans also expanded during the same period, from ₹22.12 lakh crore to ₹30.31 lakh crore, but the relative growth advantage remained with Direct investments.

Direct AAUM has climbed from about ₹14.6 lakh crore in March 2021 to nearly ₹39.0 lakh crore in March 2026, while regular AAUM has increased from about ₹17.6 lakh crore to roughly ₹40.4 lakh crore. This also reflects that the client has become mature, sophisticated in terms of investments irrespective the decision goes wrong in the choice of funds and investments. Thanks to the rapid growth of fintech platforms, robo-advisory services, and online mutual fund investment channels, which have led to the transformation of investment decisions for investors.  This growth helps to have fewer conversations on the basics of mutual fund investments and more of the advanced topics of investment objectives, long-term dreams, and plans.  

Index funds and passive investing have become a larger part of investors' portfolios, where the end user wants to ride the index journey rather than getting into active fund management. ETFs and Passive Funds recorded an impressive CAGR of 34.42% over the five years, compared to 16.14% CAGR for Active Funds. This sharp divergence highlights the increasing investor preference for low-cost, rule-based, and benchmark-linked investment strategies. EPFO allocations, corporate treasury investments, and large institutional mandates have significantly boosted ETF flows.

Most of this direct investment is from the Tier 1 cities, since Tier II and Tier III cities, where distributor-led advisory remains crucial for investors onboarding, trust-building, and financial handholding.

This also raises the questions of expense ratios and fees earned by a mutual fund distributor. This leads to the demand for goal-based investing, financial planning & behavioural investment planning. The asset management business and distribution are going through a transformation where both models of direct and regular will move simultaneously in the coming years.

The Indian mutual fund ecosystem is gradually moving toward a hybrid model where both channels coexist, but with increasing dominance of informed, digitally enabled, and cost-conscious Direct investors. This transition will redefine distribution economics and advisory models across the industry in the coming years. Mutual fund advisors must increasingly justify active fund recommendations through measurable alpha generation and portfolio outcomes, rather than relying solely on historical brand trust. This needs significant actions to be taken by the MFD’s to make a distinctive impression before AI gets into regular business revenue share.

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Don't Expect much Before Q3- FY-27-Game of Mindset

 On a year-to-date (YTD) basis, the Nifty 50 is down approximately 7%. In comparison, the Dow Jones is marginally higher by 0.17%, the Nasdaq has gained over 3%, and the S&P 500 has risen 2.4%. Among Asian peers, Japan’s Nikkei has surged over 14%, while South Korea’s Kospi has rallied more than 43%. It's more important to be mentally prepared for what to expect in the coming days rather than just making investments or holding the same.

The time is not good, and Q1 of FY-27 also does not look good.  Yes, we are yet to finish the results of Q4 FY-26, and we are discussing here for Q1 of FY-27. The reason being we need to be mentally prepared rather than getting shocked and having night attacks due to investment decisions.

The biggest factor to watch is whether the current market has already discounted it or it's yet to be discounted. We have much pain left as Q1 results will be destructive for the markets, and if the monsoon also falls short, then we will have a perfect recipe for slow growth.

The war might end, but the damage will take time; it is no longer the crude price factor but the ancillary impact due to the current war. The supply disruption is a major factor to be accounted for and figured out. Not a single fund manager across the globe can figure out the impact of the current disruption and its longevity. Indian markets are going to face issues only due to the disruption of the supply chain and domestic reasons, like the weaker monsoon.  If the monsoon is not up to the mark, then India will face issues of demand for goods and services and water supply issues going ahead. Agri inflation will shoot up, making this uncomfortable for the RBI.

In fact its not the Q1 but the Q2 also will be under pressure since all festivals are in September and October stretched to November, hence Q3 of FY-27 will get green shoots, which will be impactful for your current investments being executed by you now.  Provided that there is no Comic Act by Mr Trump going ahead. In short, you need to be prepared to find investment opportunities in FY-27 rather than looking for returns like the last 6 years. Change of mindset is important in FY-27 about the expectations from the market.

Further, due to the war, global inflation will shoot up, which will prompt many nations to press for a rate hike. This will impact INR in the coming days, and markets are bound to face headwinds. Expectation about FII’s coming back to India seems to be more dicey in the coming days due to the structural shifts and long-term issues that are going to arise from the war.  FII’s have better options as of date, like higher US bond yields of 4.3–4.5% and better global opportunities, followed by the US, where tech and AI stocks fuel growth, have pulled more of the funds compared to India, which is dominated by financials and consumption, limiting broader upside. A 2–3% rupee depreciation has further reduced foreign investor returns, keeping markets subdued despite strong domestic inflows and 6–7% GDP growth expectations.

On the other hand, investors have raised their net inflows into equity funds to ₹40,450 crore in March from ₹25,977 crore in February 2026, a 56 per cent jump. Flows through the Systematic Investment Plan (SIP) route hit a new record in March, bringing in ₹32,087 crore and up 7.5 per cent from the previous month. All this is good news.

Among all these, the good part is that the Indian financial system is strong enough to face any blackouts. Bank credit expanded by 16.08 per cent year-on-year (Y-o-Y) in FY26, marking the fastest pace since FY24, when credit in the system grew by over 20 per cent.  ), During the same period, deposits rose by 13.47 per cent Y-o-Y, also the highest growth since FY24, according to the latest data from the Reserve Bank of India (RBI).

Nifty 50’s trailing twelve-month (TTM) P/E has moderated from around 24.4x in September 2024 to approximately 21.3x as of April 15, 2026, below its five-year average of ~23.0x. This might get cheaper in Q1 of FY-27, which will keep all investors waiting for investments.

Many investors believe that, due to the current correction, large caps have become cheaper and will bounce back significantly, providing a cushion for the portfolio. Well, the Nifty 50's fall has been stable compared to Midcap and small cap; hence, the notion that large caps have corrected and become cheaper is wrong.

The Depth of Fall and & Opportunity

Large Caps: Many large-cap names corrected 10–25% from their 52-week highs (e.g., some IT, auto, and FMCG stocks down 17–48% from peaks in select cases).

Midcaps: In broader mid-cap universes, over 119 out of ~143 stocks turned negative in early 2026, with dozens falling 10–50%+ from 52-week highs. 14+ Nifty Midcap stocks plunged 40–50% from their peaks at points.

Small Caps:  In the Nifty Smallcap 250 or broader small-cap universe, ~50–70%+ of stocks saw double-digit declines; many fell 30–50%+ (some even 50%+ from 52-week highs). Examples: Over 20 small-cap stocks dropped more than 50%, and 82+ fell over 30% in certain drawdown periods.

On the sectoral front, don’t get caught up in investing in defensive. Be open to all sectors since every sector, and your investments, have long-term fortune, and they are bound to come up from the bad cycle

Conclusion:

Invest through the STP mode.  Don’t expect large caps to bounce back compared to the fall since they have failed less compared to midcap and small cap stocks. This is one of the best times to build wealth. Book losses and don’t keep them close to your heart. Exiting from non-performing things increases the opportunity of recouping the losses from good investments. Re-alignment of the portfolio is more important compared to investing fresh money. Don’t go for investments in stocks just because corrections have happened, remember even the best stock that has fallen may not rise quickly. Hence, invest in MF since stocks have fallen my 50%, but not a single mutual fund has fallen by 50%. This is mostly ignored while doing investments decision.  Moreover, as a client, one needs to be mentally prepared that this year is the year of investments and not to chase returns. In every 4-year cycle, the market provides this type of opportunity to investors and creates long-term wealth.

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Be prepared in mind for market behaviour and your investments

 

No Fund manager was able to and would be able to tell where the markets will go in the coming months? But that Doctor is none other than the Financial Advisor with whom you can't invest and is the same one who will be treating the Bull.

Every client is panicked with half-truth on their lips about the market getting worse and doomsday is nearby. Financial advisors are just trying hard to keep clients awake from all sorts of rumours about the market. All foreign brokerage houses have downgraded the outlook of NIFTY and the Indian GDP. Well, it's very easy to point fingers at other countries rather than rating themselves more critically.

Well, the current market fall is an opportunity, but what type of opportunity? Will there be no war in CY 2026? Will tariffs come down? Will Mr Trump sit quietly and avoid page 3? Do you think midcaps and small caps will not fall more from here?

The client’s behaviour towards investment has several categories. Those clients who have bounced back from the Global Financial Crisis have strong faith in the market, and the same with those who came out of Covid. But the Gen Z community of investors and the 1st time investors in the financial market are the ones who are the 1st time student of this volatile market rally. Since 2020 to 2024 the rally of the market have created approximately 10–12 crore (100–120 million) new demat accounts were added in India from 2020 to 2024. This surge reflects the massive post-COVID boom in retail participation in the Indian stock market, driven by digital onboarding (e.g., Aadhaar eKYC), low brokerage costs, IPO frenzy, and rising awareness via apps and social media.

These clients are hungry for investing as well as scared to face losses beyond a certain point. Leveraged trades and traders are at the peak of risk, which impacts the market too in these times. The same is getting well reflected.

Every financial advisor is important in these times to keep these clients informed about the various market cycles witnessed over the past 2 decades. In the current scenario

 The Indian equity market has undergone a significant transformation over the past year, particularly within the midcap and smallcap segments. After a prolonged phase of exuberance through 2024 and early 2025, valuations in these segments had reached levels that were increasingly difficult to justify purely on fundamentals. The subsequent correction, rather than signalling structural weakness, has brought much-needed balance back to the market.

At present, the Nifty Midcap 150 trades at a price-to-earnings (P/E) multiple of around 29.7x, while the Nifty Smallcap 250 is at approximately 24.1x. Earlier during the 2024 rally, Midcaps reached levels of around 42–45x, while smallcaps climbed to approximately 34–35x. The correction that followed has been substantial, with midcap valuations declining by over 30% from their peak and smallcaps witnessing even deeper cuts. Today, midcaps are trading slightly below their long-term median multiples, while smallcaps are significantly below theirs, marking one of the most meaningful valuation resets in recent years.

Yes, the market has witnessed time correction and price correction beyond the market cap/earnings outlook in the mid & small cap segment. Now, when we try to figure out the growth of the segment, we find that  based on consensus estimates for the next two to three years, midcap companies are expected to deliver earnings growth of around 15–18%, while smallcaps are projected to grow at a faster pace of 18–21%. Translating this into PEG terms, midcaps are currently positioned at around 1.65–1.98, which is broadly considered reasonable. Smallcaps, with PEG ratios in the range of 1.15–1.34, appear more attractive, suggesting that investors are paying less for each unit of growth compared to the recent past.

ROE another powerful tool to find out how the above two numbers are justified and to believe in investing in midcap and small cap. Midcaps currently exhibit median ROCE levels of around 15.5–16%, while smallcaps are in a similar range of 15–15.8%. With ROCE levels around 15–16%, P/E multiples in the range of 24–30x appear more justified than they did a year ago. Investors today are effectively paying lower prices for businesses that are generating similar or even better returns on capital. Speculative prices in midcap and small cap has died currently in this market correction. This is one of the biggest gifts given by the current correction. The threat of falling GDP, crude oil price risk, etc., is less impactful compared to the COVID times and the GFCs. The only risk is that if we get another war, then that would add further fall, but with that fear, no one will ever make money, nor any investments.

STP and a staggered way of investing are best suited in this market, taking a bet for the next 4 months. The current quarter results will be on the higher side since the war impact will be reflected in the 1^st quarter of FY-27. But by that time, the monsoon will kick in, and the demand scenario of the Indian market will change, giving a new path to the market. As an investor, be prepared that you will get more falls and certain short-term ups. Don't try to predict the market and keep your ears open, but don't act in haste. This mental preparation for the market to invest, particularly as long as Mr Donald is on chair, will be fruitful and will gain you more success.

Well, those who are still scared of them, the message is that if we look at the FII’s and DII’s pattern of investments, we find

Ownership Shift (as of late 2025 data)

• DIIs: Record ~18.7% of NSE-listed equities (up significantly; mutual funds alone ~10-11%).
• FIIs/FPIs: ~16.7% (13-year low in some metrics).
• Retail + HNIs (Household): Direct + via MFs reached ~18.5% combined by mid-2025 (fivefold increase since 2020). Equities' share in household financial savings rose from ~2.5% in FY20 to over 5% by FY24.
• One of the biggest trends in 2025 was the sharp divergence between FIIs and DIIs in Indian equities.
• While FIIs were heavy sellers, DIIs stepped in aggressively.
• DIIs invested a record $90 billion in 2025 (vs $63B in 2024)
• FIIs pulled out nearly $19 billion, their highest-ever outflow
• Over the last decade, DIIs have invested ~$256 billion, showing strong and consistent domestic support for markets.
• Bottom line: Domestic money is now the key pillar of the Indian market, cushioning FII volatility.

 

So invest through the advice of your financial advisors and don’t try on your own, since you don’t know which stocks will perform better.  Many investors have the question in mind: MF or direct stock. Well, MF is 1^st preference since you have new expertise to manage the money. Only correction and rich valuation will not make money from where, and don’t expect a broader market rally to happen; it will be more of a stock-specific rally.  

Once you get comfortable in MF, you can start cherry-picking.  If you think that under the current scenario every stock is a mouthwatering cherry pick, well, you are bound to incur losses.  It is better to retain the ability to invest and be an investor rather than taking short-term bets and losing a long-term behavioural mindset of not investing in the market for the next 2 to 3 years.   When the price in the market is too low, and there are too many options, then as an investor, you are bound to get carried away with the price being low. Remember, price being low is also a trap since during these times many basic fundamental aspects of companies go for toss-like management, debt levels, pressure from private equity to shut down many important projects and delay product launches. Hence, seek a financial advisor. More than investing, now it's the mental framework required to be built for facing any bad days further. If, as an investor under the guidance of a financial advisor, you are well prepared mentally for any upside or downside rally of the market, your investments will remain safe, and your mindset to invest will too.

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NAZAR & SABAR- Investor & MFD for both required

Portfolio advisory has become a major issue now since Nazar and Sabar are highly required for investment decisions to be made ahead of time.   Falling GDP growth, rising inflation, pay cuts and job cuts through AI, confused central banks regarding whether to hike interest rates or not and last but not least, the tariff war and war alone. All these are making the global economy beyond uncertainty. The latest warning from the Organisation for Economic Co-operation and Development underscores a familiar but dangerous sequence: war-driven disruptions in energy markets are reigniting inflationary pressures and clouding the global growth outlook just as the world economy was attempting to stabilise. I am surprised people who do not come from a finance background have come up with podcasts and YouTube videos. Is SEBI keeping a watch on them? Loss of investments is notional till the same is booked. 90% of the investors are worried about notional loss and not real loss. This makes decision-making hard for an advisor to guide and convince their clients.  The statement of our Prime Minister, Mr Narendra Modi, is a matter of concern and should not be shredded.

Don't think about returns since now is the time to wait and watch, since Sabar will make you win, and nazar will help you to identify the fake rallies.

Let’s be very frank and open that we don’t know whether this is the last war or if more stuff is awaited. Past returns have turned out to be negative, despite the long-term investment objective, since the behavioural aspect of the client getting scared and greedy is hard to align.  NRI-focused MFDs' business will take a hit since remittance will dry up.  Maharashtra and Kerala top the list, together capturing over 40% of India's Gulf remittances, based on FY2023-24 RBI data that holds steady into 2026 amid ongoing flows. Hence, MFDs will take a hit this year due to the current war issues.

Rising energy costs from the conflict directly hit consumer prices, with secondary effects on core inflation via supply chain strains and wage pressures. Europe faces steeper risks due to energy import reliance, potentially forcing ECB rate hikes. Early 2026 growth has held from prior momentum, but analysts see tariffs and uncertainty clouding the outlook further.

The Middle East remains a critical artery for global oil and gas supply, and any disruption—whether physical or perceived—immediately translates into higher prices. Energy, unlike many other commodities, sits at the base of the economic pyramid. It influences transportation, manufacturing, logistics, and even food production. As prices rise, the effect cascades across sectors, creating a classic case of cost-push inflation. The OECD’s projection of G20 inflation at around 4%, with U.S. inflation near 4.2%, reflects not just temporary volatility but the risk of inflation becoming structurally sticky. Over the past two years, monetary authorities have worked aggressively to tame price pressures through rate hikes. The immediate impact is not so much since inflation has been low and adjustments have been mixed across different countries.

Higher interest rates, combined with rising input costs, create a dual burden on economic growth. Further, the global nature of this challenge makes it particularly complex. Import-dependent economies, such as those in Europe and parts of Asia, face additional pressure through worsening trade balances and currency volatility. But as I said, nazar and sabar are important-the current impact of this war is not uniformly negative across all sectors. Many countries benefit and get opportunities where the cost of manufacturing is less, which leads to the supply of goods at lower production costs. India stands to benefit from the judicious use of its abilities and resources through government agencies.

India's strategic oil reserves, diversification to Russia, and robust fundamentals (e.g., 7%+ GDP growth momentum) provide buffers against prolonged shocks. RBI may delay rate cuts to tame inflation, prioritising stability over stimulus. Prolonged conflict could shave 0.5-1% off growth if oil averages $90+/barrel.

Conclusion:

Investment opportunities for MFDs from their clients will slow down as reduced Gulf remittances from the Middle East conflict would strain millions of Indian households, particularly in migrant-heavy states like Kerala, Uttar Pradesh, and Tamil Nadu, where these inflows fund 30-50% of consumption for recipient families. India received $51.4 billion from Gulf nations in FY2025 (38% of $135.4 billion total remittances), supporting essentials like food, housing, education, healthcare, and real estate. A 10-20% drop—potentially $5-10 billion annually in a prolonged conflict—could curb spending, raise poverty risks, and slow rural-urban consumption that drives 60% of GDP.  

The bottom line is clear: war acts as a multiplier of economic risk. By pushing up energy costs, sustaining inflation, and delaying monetary easing, it constrains the very conditions needed for a durable global recovery. As long as these geopolitical tensions persist, the world economy will remain in a state of cautious resilience—growing, but below potential, and always vulnerable to the next shock.

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How Far Could the Rupee Slide?

The whole market and Indian economy, and its analyst community, are busy focusing on uplifting the statements that will get Nifty back to the 26000 levels. For this, we want to ignore every negative aspect and risk of the market. We have diverted our mind to the Iran war and its impact on the Indian market, whereas at home, we have a major issue of depreciating uncontrolled INR. INR have been a major issue in the last  6 years since the day we got into Covid lockdown. The FII’s are also sceptical to invest in India for this particular reason, more than the valuations and earnings. The current fall is an opportunity that DIIs and FII’s both know, but does that excite FIIs to invest or redeem?

India's forex reserves at ~$710 billion look ample (covering ~11 months of imports), but quality matters more than quantity:

Foreign Currency Assets (FCA) erosion: Down to $555 billion from $621 billion in September 2024—a 10%+ drop. FCA's share has shrunk to <78% from >90% pre-2020, limiting RBI's dollar-selling firepower for interventions.

Gold dominance: Holdings up ~4x in five years (now ~$70–80 billion equivalent at current prices), boosting total reserves but illiquid for daily FX defence. RBI sold minimal gold historically; it prefers spot USD.

Likely $80–100 billion now (official data lags), tying up future dollars for importers/exporters. This amplifies intervention costs without immediate liquidity. RBI data (weekly bulletins up to March 2026) confirms these trends. Similar 2021–22 dips saw INR hit 80/USD before a partial recovery.

External and Domestic Triggers:

Current account flip: Q4 surpluses (0.2–0.7% GDP) relied on services exports ($110B+ annually) and remittances ($30B+ quarterly). Now, trade deficit widened to $30B/month (oil at $75–80/barrel, imports up 15% YoY), Middle East tensions cut remittances 5–10%, risking 1–2% GDP deficit.

Capital outflows: FIIs pulled $10B+ in 2025 amid US rate hikes (Fed funds at 4.5%) and global risk-off. India's 7%+ fiscal deficit deters inflows.

REER signal: Below 100 since mid-2025 (RBI index), indicating overvaluation correction—INR "should" weaken 5–10% for competitiveness, per BIS models.

Historical parallels: 2013 taper tantrum (INR 68/USD), 2022 Ukraine shock (83/USD)—each saw 10–15% slides over 6–12 months.

India’s foreign exchange reserves have dipped below $710 billion, falling from a recent high of over $728 billion just weeks ago. On the surface, this still appears to be a comfortable buffer. However, a deeper look at the structure of these reserves points to growing vulnerabilities.

A key area of concern is Foreign Currency Assets (FCA), which have declined to roughly $555 billion. This level is not only lower than recent months but also below what India held back in 2021. Over time, the share of FCA in total reserves has steadily fallen to under 78%, compared to more than 90% a few years ago. While rising gold prices explain part of this shift, the drop in absolute FCA levels—around 10% lower than in September 2024—highlights a more structural issue.

Gold, on the other hand, has become a much larger component of reserves. Driven by both higher prices and increased accumulation, India’s gold holdings have expanded nearly fourfold over the past five years. While this adds strength to the balance sheet, it reduces the Reserve Bank of India’s (RBI) ability to actively manage the currency, since interventions typically rely on selling dollars rather than gold.

Adding to the pressure is the RBI’s forward book, which has already exceeded $60 billion and may now be approaching $100 billion. This reflects ongoing efforts to manage currency volatility but also signals rising commitments in the market.

Externally, India’s position may also weaken. The country recorded a current account surplus in the fourth quarter over the past two years, supported by strong services exports and steady remittances. This time, however, the outlook is less optimistic. A widening trade deficit and softer remittance inflows—particularly due to tensions in the Middle East, which contributes about 40% of such flows—could push the current account back into deficit.

While further RBI intervention is likely, its effectiveness has limits. It can help contain sharp volatility and speculative movements, but it cannot fully counter persistent global pressures. Continued foreign investor outflows and an unfavourable global environment could keep the rupee under strain. This is the place where FII's are concerned about, and this does not attract them to invest in India. The biggest question is that despite the current sharp correction in very pockets, will FII's invest in India now?  Unless the rupee gets into a stable form, the currency risk does not attract them. This also raises the risk of investments for DII's since they alone cannot keep the market alive for long. The SIP book might look attractive today, but it's not sustainable since, currently, every portfolio has wiped out the last 2 years' gains.

Coming to the rupee, if these trends continue, the rupee could drift toward the 97–98 range against the US dollar. The real effective exchange rate (REER), a measure of currency competitiveness, had already fallen below 100 by mid-2025 after a prolonged period of overvaluation. Past episodes—such as the oil price surges in 2007–08 and 2011–14—also saw extended periods of rupee weakness.

In summary, while India’s reserves still offer a degree of protection, their shifting composition and external risks suggest that maintaining currency stability may become increasingly difficult in the near term.

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