US Stocks | Unlikely to see LRS relaxation until FII outflows reverse: Karan Aggarwal, Ametra PMS

Amid continued pressure on Indian markets from currency weakness and persistent foreign institutional investor (FII) outflows, expectations of easier overseas investment rules remain muted.

Speaking to Kshitij Anand of ETMarkets, Karan Aggarwal, Co-founder and CIO of Ametra PMS, explains why any relaxation of the Liberalised Remittance Scheme (LRS) is unlikely until external balances stabilise and FII trends turn supportive.

He also shares his perspective on how Indian investors should approach global diversification, arguing that international equities are better positioned as portfolio diversifiers rather than core holdings, with selective exposure to innovation-driven sectors such as technology and artificial intelligence across developed markets. Edited Excerpts –


Q) Amid geopolitical concerns, can Budget 2026 further simplify the Liberalised Remittance Scheme (LRS) to make global investing smoother for Indian investors?
A) At this juncture, Indian equity markets are under pressure from the twin impact of currency depreciation and sustained FII outflows. Any further simplification or liberalization of the Liberalised Remittance Scheme (LRS) would only exacerbate these challenges by increasing capital outflows.

It would therefore be unreasonable to expect any relaxation in the LRS framework until there is a meaningful reversal in FII trends and greater stability in external balances.

Q) Should global diversification be positioned as a core part of Indian household asset allocation? What is the ideal allocation for investors
A) Indian equity markets have historically shown low correlation with global markets, typically in the 0.30–0.40 range, enhancing their role in portfolio diversification.

That said, the Indian economy remains predominantly consumption- and capex-driven, whereas global markets such as the US, China, Japan, Korea, Europe, and Taiwan offer meaningful exposure to R&D-intensive sectors and innovation-led growth, particularly in technology and AI—areas where domestic markets have limited representation.

Accordingly, Indian households may view international equities not as core allocations but as diversification enhancers, with a recommended 5%–10% exposure diversified across geographies and focused on technology and AI opportunities in developed markets across the US, Europe, and Asia.

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