ETMarkets Smart Talk | The next 12 months may be about capital saved, not returns made: Praveen Jagwani

What if the biggest investment opportunity over the next 12 months isn’t about making the highest returns—but about protecting the capital you already have?

With geopolitical tensions, global trade disruptions, currency volatility and shifting interest-rate expectations creating a more uncertain market environment, investors may need to rethink how they define portfolio resilience.

For Praveen Jagwani, CEO of UTI International, the focus in the coming 6-12 months should be less on chasing returns and more on preserving capital.


Jagwani believes global risks are increasingly stacked against speculators, making it important to reduce leverage and build portfolios across quality equities, high-grade debt, precious metals and real estate. He argues that maximum diversification could be the key defence if global markets face a sharp shock.

In this segment of ETMarkets Smart Talk, we discuss what portfolio resilience really means in 2026, the impact of higher global yields, a potentially stronger dollar, pressure on the rupee and the risks of concentrated bets in high-beta and smaller companies. Edited Excerpts –

Q) We have entered an environment where geopolitical risks, global trade disruptions, currency volatility and shifting interest-rate expectations can change the market narrative very quickly. What does portfolio resilience actually mean in 2026?

A) Absolute resilience is a moving target, always aspired for but rarely fully captured. It represents the perfectly diversified portfolio across uncorrelated asset classes to shield wealth from the impact of various market factors.

The coming 6-12 months would be evaluated not so much on total returns made but total capital saved. Global risks are stacked against speculators.

This is the time to eliminate leverage and build a core portfolio across quality equities, high-grade debt, precious metals and real estate.

There will be few places to hide if there is a global meltdown thus maximum diversification is the only true driver of resilience.

Q) A possible Fed rate hike has suddenly become a key market risk. If the US Fed resumes tightening, what would be the immediate impact on Indian debt and equity markets? Could a stronger dollar and higher US yields put enough pressure on the rupee to constrain the RBI's room for monetary easing?

A) The profound challenge facing the US is a fiscal deficit that has become unsustainable at a time when the underlying economy is structurally weak. In fact, much of the current economic momentum is being propped up almost exclusively by AI-related capital expenditure.

Within this framework of fiscal dominance, traditional monetary policy loses its edge. The Fed primarily influences the short end of the curve, while longer-term interest rates remain at the mercy of global demand for US Treasuries. Consequently, a token 25-basis-point Fed hike this month does little to alter the domestic landscape.

The transmission mechanism of interest rates within the US is largely impaired by aggressive fiscal spending, and higher borrowing costs will only end up straining an already vulnerable consumer base. However, the global transmission channel of rates remains highly potent.

The current inflationary cycle is fundamentally driven by supply-side shocks, chiefly oil prices and tariffs, rather than excessive demand. As a result, a US 10-year yield hovering around an attractive 5% creates a formidable headwind for all major currencies, including the Indian Rupee.

With central banks in Japan, the Eurozone, and the UK already pushing rates higher, the RBI will face intense pressure to follow suit simply to maintain capital equilibrium. The US Dollar firmly retains its status as the world’s dominant reserve and trade currency.

Even if the greenback undergoes long-term structural debasement, its immediate path will trigger sharp volatility across emerging market asset classes.

Q) Do you see UPI charge as essentially immaterial for long-term investors but potentially more relevant for high-frequency traders and smaller-ticket transactions?

A) The proposed UPI charge is unlikely to be material for a long-term investor, particularly given the low rate and transaction cap. Its impact is more likely to be felt by investors or intermediaries who make frequent manual transfers or execute several smaller transactions, where even modest costs can accumulate over time.

The larger consideration is whether the charge remains transparent and does not make low-cost participation in capital markets less attractive.

Q) Is there a risk that multiple small charges across the investment ecosystem could eventually become a meaningful drag on retail returns?

A) Any single charge may appear insignificant, but investment returns are ultimately earned after brokerage, STT, exchange and regulatory fees, fund expenses and taxes. For a long-term investor with low portfolio turnover, the cumulative effect should be limited.

For frequent traders, particularly in derivatives, transaction costs can become a meaningful drag on returns. The focus should therefore remain on low turnover, cost transparency and avoiding unnecessary trading. It is evident that the regulator wants to incentivize investors as against traders.

Q) Equity markets have delivered strong returns over the long term, but valuations in parts of the market remain elevated. Does resilience today require reducing equity risk, or simply becoming more selective?

A) Resilience does not necessarily require a broad reduction in equity exposure. It requires greater selectivity and more realistic expectations about returns. India’s structural growth opportunity remains compelling, but markets do not move in a straight line, and valuation dispersion is significant, especially across parts of the mid- and small-cap universe.

The right response is to own businesses with durable earnings visibility, sound balance sheets, pricing power and credible capital allocation, while avoiding the temptation to extrapolate recent returns indefinitely.

Investors should diversify across market capitalisations and styles, rebalance periodically, and ensure that their equity allocation remains aligned with their time horizon and risk capacity.

India continues to command a valuation premium relative to many markets, reflecting its growth profile, but elevated oil prices, global yields and tighter financial conditions remain important variables.

Q) India’s macro fundamentals remain relatively supportive, but global yields and capital flows can still influence Indian bonds. What gives you confidence in India’s debt market over the long term?

A) Confidence in Indian debt over the long term rests on a combination of relatively robust nominal growth, a deepening domestic savings pool, improving policy credibility and a progressively broader investor base. For domestic investors, high-quality fixed income continues to play an important portfolio role.

It provides income, liquidity, capital-preservation potential and diversification against equity volatility. Interestingly, globally the fundamentals for many pockets of debt markets are increasingly becoming impaired. However, India remains insulated to a degree to the global malaise.

Global yields and foreign flows will certainly influence the near-term path of Indian bond yields, particularly at the longer end of the curve. Luckily, India’s bond market is not driven by external flows. The primary participants are domestic banks, insurers, provident funds and mutual funds.

They provide a substantial and stable demand base. The long-term investment case will be strengthened further by continued fiscal consolidation, contained inflation, prudent government borrowing and the steady broadening of global investor access.

Recent trading dynamics also point to relatively contained movements in the 10-year G-Sec despite pressure from higher global yields.

Q) What is the biggest portfolio risk investors may be underestimating today?

A) Globally, the biggest underestimated risk is investor complacency around concentration and liquidity. Strong recent returns can encourage investors to crowd into the same popular themes, high-beta segments or smaller companies, often without fully recognising how quickly liquidity can disappear when sentiment turns. As has often been said, liquidity is like a cab on a rainy evening, disappearing when you need it most.

A second related risk for Indian assets is that of contagion from global macro shocks, particularly higher-for-longer global yields, sustained oil-price strength, a weaker rupee or a sudden reversal in foreign flows.

These can affect valuations even when India’s domestic growth story remains intact. India’s long-term fundamentals may be resilient, but portfolios still need diversification across asset classes, market-cap segments and sources of return.

In the current environment, disciplined asset allocation and valuation awareness are likely to matter more than trying to chase the latest outperforming pocket of the market.

Disclaimer:

The views expressed are the author’s own views and not necessarily those of UTI Asset Management Company Limited. All illustrations/ examples are purely meant for ease of understanding of the concepts and aid in planning by the investor. All illustrations/ examples that depict future values or other estimated numbers are based on reasonable assumptions and in no way give any guarantee or assurance or indication of the future performance. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product referred to directly or indirectly in this article, will be suitable for your portfolio. Please note that past performance may or may not be sustained in the future and is not a guarantee of any future returns. The reader is urged to consult his or her financial advisor before making any investment decisions. UTI Asset Management Company Limited (UTI AMC) or UTI Mutual Funds (UTI MF), along with its affiliates, assumes no obligation to update or otherwise revise these estimates.

Mutual Fund investments are subject to market risks; read all scheme-related documents carefully.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times.)