Investment Advisory
Investment Advisory
Every client family I sit across from this year is asking a version of the same question, in different words: where is the ground? For over a decade, our conversations with you have started from valuation, from cycles, from the reasonable expectation that patience gets rewarded. This year, I want to start somewhere more honest — with uncertainty itself, and with what discipline looks like when the map is genuinely incomplete.
Geopolitics has not receded as a market variable in 2026 — it has become the dominant one, and it has arrived from more than one direction at once. The Russia-Ukraine conflict, now in its fifth year, set the template: a war without a visible endpoint, its costs absorbed slowly into energy prices, shipping routes and defence budgets rather than resolved. Close behind it came the West Asia dimension — the Iran-Israel conflict and Strait of Hormuz tensions pushed crude above the $100 mark in March — and running through the middle of both, a direct economic shock closer to home: the US-India tariff confrontation, which at its peak in 2025 put Indian exports under some of the harshest duties Washington imposed on any trading partner. Markets have spent the months since pricing and re-pricing the odds of escalation versus de-escalation on all three fronts simultaneously.
The market reaction has been instructive. The Nifty fell roughly 10% in March as the Hormuz situation intensified, then clawed back as a pause in the conflict and progress toward a US-Iran understanding pulled crude sharply lower through June. By late June, cooling tensions and easing oil helped the Nifty 50 and Sensex each add close to 1.7% for the month, with financials doing the heavy lifting even as IT names sold off sharply on weak global tech-spend signals. This is the pattern we should expect to keep repeating: sharp geopolitical drawdowns, partial and uneven recoveries, no durable all-clear signal. Waiting for a formal ceasefire before acting is itself a position — usually the wrong one, since markets tend to move 10-15% ahead of the headline that would make everyone comfortable.
Layered on top of the wars themselves has been a second, more direct shock: the US-India tariff confrontation. Through much of 2025, Indian exports to the US faced a combined duty that reached roughly 50% — a 25% reciprocal tariff plus a further 25% penalty tied to India’s continued purchases of Russian crude — placing India, briefly, among the most heavily tariffed economies trading with Washington, in the same bracket as sanctioned states.
Independent estimates at the time suggested India’s dollar exports to the US could fall from about $86 billion to near $50 billion, with textiles, gems and jewellery, shrimp and carpets — labour-intensive sectors employing hundreds of thousands — facing the sharpest hit, and GDP impact estimates ranging from roughly 0.9% to 1%.
The episode eased, but did not fully resolve. On February 2, 2026, the US and India announced a bilateral deal cutting the effective tariff from 50% to 18%: the punitive 25% linked to Russian oil was withdrawn as India committed to reducing that trade, and the reciprocal component was trimmed from 25% to 18%. This was a genuine de-escalation and markets took it as one.
It is not, however, a settled outcome. Key terms — India’s move toward zero tariffs on US goods, the scale and timing of a pledged $500 billion in US purchases, opening of politically sensitive sectors such as dairy and poultry — remain unconfirmed on the Indian side even as they were announced from Washington, and no formal free trade agreement has followed. A separate, unrelated flashpoint persists: in late February 2026 the US imposed preliminary countervailing duties of roughly 126% on Indian solar cell and module imports, a reminder that sector-specific trade actions can resurface even after a broad thaw.
For portfolio purposes, the practical takeaway is that the tariff overhang has moved from acute to chronic. It is no longer the single dominant risk it was in mid-2025, but it remains a live variable that can reprice export-oriented sectors quickly and without much warning — as the solar duty shows. Businesses with concentrated US revenue exposure, particularly in the labour-intensive export sectors named above, warrant continued caution in stock selection even as the headline number has improved.
It is worth being precise about what “equity has underperformed” means, because the aggregate hides the real story. The broad indices have indeed been unrewarding — the NIFTY 500 returned a modest single-digit figure in 2025, and the Nifty 50 is down slightly on a trailing one-year basis as of this month. But this has not been a uniform bear market. It has been a market of violent internal rotation.
| Metric | Detail |
|---|---|
| Nifty 50, trailing 12 months | Roughly flat to marginally negative (-4 to -5%), against a 52-week range of about 22,180 to 26,375. |
| Nifty IT Index, June 2026 | Down close to 9.6% in a single month, as TCS, Infosys and Wipro fell on weak discretionary tech spend and a cautious Accenture outlook. |
| Nifty Bank / Private Bank, June 2026 | Up over 6% in the same month — the clearest evidence that this has been a sector rotation, not a broad collapse. |
| Nifty REITs & InvITs Index (2025) | Total return of roughly 25%, against Nifty 50’s own return near 12% — the flight to yield-bearing, contracted-income assets has been real and has paid off. |
| India 10-year G-Sec Yield, March 2026 | Rose to about 7.0%, a 20-month high — the “safety” trade in duration has not been free of volatility either. |
| Q1 FY27 GST Collections (June 2026) | Up nearly 14% year-on-year to about ₹1.95 lakh crore — underlying domestic demand has stayed resilient even as sentiment soured. |
The lesson embedded in this data is not that equity as an asset class has failed. It is that the basket approach — broad index or diversified fund exposure — has captured the drag from a handful of large, richly-valued sectors (technology being the starkest example) while missing the compensating strength in financials, consumption plays benefiting from GST rationalisation, and select industrials. A family holding the index has felt every point of the IT correction and only a diluted share of the banking rally.
On the Absence of an AI Story in Indian Markets
This is a legitimate and structural concern, not a sentiment-driven one. India has been a fast follower rather than a frontier participant in the AI platform build-out that has re-rated technology markets globally, and the derating of Indian IT services stocks this year — down close to 9.6% in June alone — partly reflects the market’s discomfort with that positioning. Global capability centres remain a genuine bright spot, now accounting for a large and rising share of commercial office leasing in India, which tells us Indian talent remains central to the AI value chain even where India-listed equity is not.
The distinction matters for portfolio construction: exposure to the AI theme through Indian public markets is limited, but exposure through GCC-linked real estate, REITs with technology-sector tenant concentration, and selectively through global allocations is available to those who build it deliberately.
REITs and InvITs: the real risk is liquidity depth, not lock-in
Publicly listed REITs and InvITs in India carry no lock-in for retail investors — units trade on the NSE and BSE like any listed security, and SEBI has progressively reduced the minimum lot size to a single unit. The genuine risks are different and worth naming precisely: average daily turnover across the listed REITs and InvITs remains thin — well under ₹80 crore and ₹25 crore respectively across the space — which means large positions can face real slippage on exit, particularly in the smaller trusts.
Distributions are also not guaranteed the way a bond coupon is; they move with occupancy, rental escalation and, for InvITs, toll and tariff realisation. The flight to this asset class in 2025, delivering roughly 25% total return against the Nifty’s 12%, was rational and well-timed, but it should be sized as a genuine allocation decision, not a reflexive safety trade — and family offices with larger tickets should specifically evaluate secondary-market depth before committing meaningful capital to any single trust.
The 10-year G-Sec yield touching a 20-month high near 7.0% in March is itself informative: it means high-quality Indian debt is now available at yields that were not on offer eighteen months ago, even before considering the post-tax position. The earlier retreat from fixed income was a response to a specific tax and yield environment; that environment has moved. This is worth revisiting family by family rather than assuming the old conclusion still holds.
Given all this, the shift in our advice is deliberate and specific, not a general retreat to caution.
1. From baskets to bottom-up stock selection
In a market where the index return is being dragged down by one or two sectors while others quietly compound, a diversified fund or index-tracking approach captures the average — and the average this year has been poor. A bottom-up approach, built around identifiable earnings visibility, balance sheet quality and sector positioning, is better suited to a market defined by rotation than broad direction. This requires more active involvement from us and from you as a family, and we are structuring our equity advisory accordingly.
2. A measured allocation to yield-generating, listed alternatives
REITs, InvITs and high-quality fixed income each have a role in stabilising portfolio cash flow while the equity picture clarifies — sized deliberately, with attention to the liquidity depth point above, not simply as a reflex reaction to equity weakness.
3. Patience as a strategy, not a default
A wait-and-watch posture on fresh large commitments is defensible right now — not because we lack conviction, but because the range of plausible outcomes on the geopolitical front (a durable Middle East de-escalation versus a renewed flare-up, Ukraine settlement versus a frozen conflict) is wide enough that flexibility has real value. This is different from inaction. It means holding dry powder with intent, ready to deploy when specific opportunities — not general market direction — become clear.
4. Building a considered LRS allocation
Diversifying a portion of family wealth outside India through the Liberalised Remittance Scheme is a sound structural response to concentrated country risk — India-specific policy shifts, currency movements, and the technology-positioning gap discussed above. This is not a vote against India; it is the same logic that leads any well-run institution to avoid single-geography concentration. We would recommend building this deliberately over time, across asset classes and geographies, rather than as a lump-sum reaction to any single quarter’s headlines.
The families who preserve and compound wealth through periods like this are rarely the ones who correctly predicted how the war would end. They are the ones who built portfolios that did not depend on that prediction.
I do not have a clean timeline for when the geopolitical clouds lift, and I would be doing you a disservice to pretend otherwise. What I can offer, with confidence, is a way of navigating that does not require us to guess correctly. Own businesses you understand, at prices that give you room for error. Keep enough in stable, income-generating instruments that a difficult quarter does not force a difficult decision. Diversify enough geography that no single government’s fortunes determine your family’s. And resist the pull to treat any single asset class — equity, REITs, gold, or otherwise — as a refuge that will not eventually demand the same scrutiny as everything else.
This is, I think, the most honest form of optimism available to us this year: not a forecast that things will soon be fine, but a structure sturdy enough that we do not need one.
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