ETMarkets Smart Talk | Cap global allocation at 20% as currency turns X-factor in 2026: Prashant Gupta

India’s Union Budget 2026 may have eased outbound investment norms and strengthened the case for global diversification, but currency volatility could alter the return equation for overseas investors.

In this edition of ETMarkets Smart Talk, Prashant Gupta, Co-founder of Wealthy.in, explains why the rupee’s recent swings — after touching 91.2 against the dollar and recovering toward 90 — make currency the decisive “X-factor” for 2026.

While trade deals with the US and EU, valuation resets in Indian equities, and improved Portfolio Investment Scheme limits create fresh global opportunities, Gupta cautions against overexposure.


A disciplined 15–20% allocation to international assets, he argues, allows investors to capture global growth themes such as US technology without letting currency headwinds erode returns. Edited Excerpts -


Q) How has Budget 2026 turned out for Indian investors investing in global markets?
A) India's Union Budget 2026-27 delivered a mixed yet largely supportive outcome for Indian investors eyeing global markets, blending eased outbound investment rules with a domestic growth focus.

A major win for diversification is the doubling of individual investment limits under the Portfolio Investment Scheme (PIS) to 10% of net worth (from 5%), giving retail investors and HNIs significantly more flexibility to allocate into US equities or global ETFs without hitting LRS ceilings as quickly.

For those funding global lifestyles, the budget provided a major relief by slashing TCS on overseas remittances for education and medical care to 2% (above 10 lakh) and reducing the tax on overseas tour packages to a flat 2%, though the 20% TCS on large pure-equity transfers remains as a friction point.

The budget prioritizes "Make in India" via PLI extensions and an aggressive infrastructure capex hike to 12.2 lakh crore (up 11%), which aids global plays indirectly through stronger exports.

The mood was less celebratory for derivatives traders; the Sensex and Nifty saw volatility following STT hikes to 0.05% on futures and 0.15% on options, aimed at curbing retail speculation.

While there were no direct tax incentives for overseas Mutual Funds, a fiscal deficit target of 4.3% signals macro stability that should keep FII interest high. Overall, it remains a favourable roadmap for long-term allocators looking to balance a robust Indian core with global satellite holdings.


Q) We have 2 major trade deals for India—one from EU and the other from US. The big trigger came in the form of India-US trade deal which lifted Indian market. Does this make a strong case for investing in either country?
A) The trade deals finalized in early 2026 are pivotal milestones. The India-US pact (Feb 2, 2026) acted as a major catalyst by slashing the effective tariff wall from a staggering 50% down to a reciprocal 18%.

By resolving the Russian oil friction and pivoting energy ties toward the US, the deal removed a massive secondary sanction risk, sparking a 2.5% surge in the Nifty/Sensex and a recovery for the Rupee to ~90/USD.

This makes a strong case for US-bound Indian exporters (Pharma, Textiles) who now face lower duties than regional rivals like Vietnam (~20%)

Conversely, the India-EU FTA (Jan 27, 2026) is a "slow-burn" play, granting duty-free access to 99.5% of Indian export value.

While the US deal provides immediate "alpha," the EU deal is a structural play that forces Indian firms to institutionalize ESG standards to navigate carbon taxes (CBAM).

For investors, the US represents immediate margin expansion, while the EU offers long-term global resilience.


Q) What about valuations – how do we fit in when it comes to long term valuation vis-à-vis other EM or developed markets?
A) The Nifty 50 is currently trading at ~22.4x trailing P/E, a healthy reset from the 25x+ levels of late 2024. Looking at FY27 estimates, the Forward P/E sits around ~20.5x, aligning with the 10-year historical average of 20.2x. India’s "quality premium" over Emerging Markets has narrowed from a staggering 80% to roughly 47% (against a 10-year average of ~57%).

Markets like China continue to trade at ~12–13x, but this discount reflects a potential "value trap" as its cooling property market drains household wealth.

In the US, while the "AI Supercycle" continues to drive Big Tech, the market is historically concentrated at ~21.5x forward P/E, leaving little room for error if growth slows or inflation surprises.

Q) The big factor to consider is currency headwinds. We have seen steep depreciation of the RBI against the USD in the past few months. How will that play a role for investors who might be considering investing in US in 2026?
A) Currency dynamics are the "X-factor" for 2026. Following the Rupee’s 5.5% slide in 2025 (peaking at ~91.2/USD in January), the trade deal sparked a recovery to ~90/USD. For Indian investors, the "bonus" that a falling Rupee added to US returns may not sustain.

In a scenario where the Rupee continues to appreciate, even a modest 2% move could effectively offset a portion of S&P 500 gains.

Consequently, capping global allocation at 15–20% remains a prudent strategy, allowing investors to capture global tech without over-exposure to currency headwinds


Q) If someone plans to invest say Rs 10,00,000 or more than $11,000. What should be ideal asset allocation?
A) For an Indian investor, with long term horizon and ability and willingness to take high risk the asset allocation that may be considered is:

The asset allocation can change based on the risk appetite, return expectation and constrains of the investor.


Q) Will commodities play a bigger role in global portfolios in 2027?
A) While 2024 and 2025 delivered historic gains—with silver and gold reaching record highs, the theme for commodities in 2027 could be return normalization. In this context, commodities may pivot from being the "aggressive performers" back to their traditional role as stability anchors.

While commodities offer essential diversification, they can also introduce significant volatility. We saw a stark example of this in the February 2026, where silver prices tumbled ~36% from record peaks of 4.04 lakh/kg to ~2.60 lakh/kg in a matter of days.

This volatility suggests that the most resilient approach for 2027 may be one of balanced co-existence, avoiding the risks found at either extreme:

The "Zero Exposure" Risk: If geopolitical tensions or global inflation stay high, a portfolio without gold or silver might lose its primary safety net during a crisis.

The "Over-Exposure" Risk: On the flip side, if the Indian economy maintains its 7.4% growth path and we see earnings-based recovery then equities might capture the bulk of market gains. In this scenario, those who are heavily "loaded up" on commodities might find their portfolios lagging.

Therefore, maintaining a disciplined 10–15% allocation in a mix of precious metals allows a portfolio to be "insured" against global shocks without sacrificing the potential growth of the Indian equity market.

For many Indian investors, Multi-Asset Allocation Funds (MAAF) are an ideal way to manage these scenarios. Because these funds automatically rebalance between equity, debt, and commodities, they remove the need for an investor to time the market.

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