While short-term performance has sparked questions, Shiv Gupta, Founder and CEO of Sanctum Wealth, believes the country’s long-term structural growth story remains firmly intact.
In an interaction with Kshitij Anand of ETMarkets, Gupta explains why India should continue to occupy a dedicated place in an NRI’s global portfolio, the structural themes likely to drive returns over the next decade, the common mistakes investors make when evaluating dollar- versus rupee-denominated returns, and how he would allocate a fresh Rs 50 crore India portfolio today.
His recommended allocation includes 45% in equities, 28–30% in cash, debt and arbitrage, 10–12% in gold, 10% in private-market alternatives, and 5% in REITs and InvITs. Edited Excerpts –
Q) How are NRIs looking at India, especially after flattish returns for the past two years? What are the queries you are receiving?
A) The fact the Indian markets have underperformed global markets, including broader emerging markets, compounded by a sharp rupee depreciation – 10% over the past year – has put a lot of people in a questioning mood lately.Many accept recent equity underperformance as mean reversion after a long, strong run but the sheer extent of the currency move has made people more cautious.Under these circumstances, for someone who earns and spends in dollars, even a reasonable rupee return can translate into a disappointing dollar return. For some, the India allocation question has changed from conviction to a need for validation.
Our view is that this is a cyclical phase, not a structural break. If anything, two flat years alongside continued earnings growth have left valuations more reasonable relative to India’s own history and better supported by the country’s growth prospects than they were at the 2024 peak.
Questioning one’s assumptions periodically is healthy, and in this case the conclusion is that the entry point has improved, not deteriorated.
Q) Despite global uncertainty and periodic corrections, India continues to attract capital. What is the biggest reason NRIs should remain invested over the next decade?A) Mainly because the case for India is one of long-term opportunity amid a structural transformation, and not one built on a couple of years of good returns.
It rests on rising incomes, favourable demographics, political stability, the steady financialization of savings, sustained infrastructure spending and a banking system in far better health than a decade ago.
While India has faced, and will continue to face, periodic stresses and strains, none of those fundamentals have changed in the past two years.
An additional underappreciated point is that India’s growth is increasingly funded by India itself. Domestic consumption, household savings and local capital markets do far more of the work than they once did.
A market supported by its own savers is more resilient than one dependent on foreign flows, which is why India tends to wobble rather than buckle when global risk appetite turns negative.
Q) Which structural themes — manufacturing, digitalisation, financialization, infrastructure or consumption — are most compelling?A) All five are important, but two stand out: financialization and manufacturing.
The shift of Indian savings from gold and property into financial assets is still early. Monthly SIP flows now run above ₹30,000 crore and mutual-fund folios have grown exponentially in the past decade, representing an investing habit adoption that has far-reaching consequences.
On manufacturing, as supply chains diversify beyond a single dominant source, India’s combination of policy support, improving logistics, a deep labour pool and a large domestic market makes it a credible alternative.
Digitalisation and infrastructure are the enablers that make the other themes work, while consumption benefits from the steady tailwind of urbanisation and rising incomes.
Q) How should NRIs think about India within their overall asset-allocation framework?A) It helps to think of an NRI as holding three wallets rather than one. The first is a global wallet with exposure to world assets, typically through a combination of developed- and emerging-market allocations.
The second is a residence-market wallet, concentrated in the country they live and earn in: salary, pension, financial assets, and, very often, the home they own. The third is an India wallet, which for most NRIs remains significant and serves a distinct purpose.
India is not meant to duplicate the first two. It supplies what they may not – a faster growth cycle, new sectors in a new market, and businesses the investor often understands better than most foreign investors.
The India wallet is also personal in ways a benchmark cannot capture. Family, inherited assets, and the possibility of returning. That can legitimately justify a larger India weighting than a purely global model would prescribe.
The right size for each wallet depends on the investor’s goals, situation, liabilities and long-term plans, not on a model’s default weighting.
The discipline is to view all three together, so that the India wallet genuinely complements the global and residence-market wallets rather than unintentionally overlapping with them.
Q) How should NRIs evaluate returns from Indian assets after currency movements?A) Currency matters, because returns are ultimately measured in the investor’s reference currency, whether the US dollar or another home currency, and the recent depreciation has genuinely reduced final returns.
But it may be unhelpful to extrapolate recent movements far into the future. The rupee has historically weakened in stages involving a sharp adjustment followed by a long plateau, averaging roughly 3–4% a year over the long run.
So the useful question is not whether the rupee will weaken, but whether Indian assets can clear a 3–4% currency hurdle and still leave the investor ahead. For well-chosen businesses compounding earnings in the teens, the answer has usually been yes. Short-term exchange rates matter far less than long-term earnings growth.
Q) What are the biggest mistakes NRIs make when comparing dollar- and rupee-denominated returns?A) The most common is comparing returns over short periods and extrapolating recent currency movements as a sign of things to come. This entails judging India over single calendar years rather than full cycles and missing the most significant market moves.
India is a higher-growth, higher-volatility market, and expecting it to beat every developed market every year is the wrong test. Measured on a risk-adjusted basis across a cycle, India’s role as a return enhancer rather than a smooth ride becomes clearer.
Q) What are the most common tax and regulatory mistakes NRIs make?A) The recurring mistakes are often mundane administrative lapses that are, nonetheless, expensive. Not updating residential status with banks and intermediaries after becoming an NRI.
Using the wrong account – NRE and NRO are not interchangeable, and treating them as such creates avoidable repatriation and tax frictions. And underestimating how capital gains, interest income and repatriation are taxed.
Many also fail to use the relevant tax treaty between India and their country of residence, failing to claim the corresponding foreign tax credit at home, resulting in double taxation.
For larger estates, the bigger omission is succession planning across multiple jurisdictions.
None of this is glamorous, but in cross-border investing the cost of getting the plumbing wrong almost always exceeds the cost of getting it right.
Q) If an NRI were building a fresh ₹50 crore India portfolio today, how would you allocate it?A) For a balanced investor, and the mix depends on the global portfolio this sits within, we would currently allocate it broadly as follows:
AgenciesAn important point to remember is that this is an India allocation, not a standalone portfolio, and should be seen against everything the investor owns abroad.
For those with deep, lasting ties to India it can be weighted more heavily; for those whose connection is limited, it probably belongs within a broader emerging-market allocation.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
