Merchants’ Chamber of Commerce & Industry organised a Special Session on ‘Where to Invest in 2026 with the Market around all-time highs?‘, TODAY (Wednesday, 24 December 2025) at 3.30 pm at MCCI Conference Hall. The speakers were Shri Saurabh Mukherjea, Founder and Chief Investment Officer, Marcellus Investment Managers, and Shri Samir Agarwal, Director, Indcap Advisors.

Shri Saurabh Mukherjea said that the Rupee loses approximately 40% of its value every decade. As a result, after paying taxes, you have in your hand less than a third of your income left in hand to finance your daily expenses and your long-term goals (like children’s education, retirement). However, it does not have to be like this. You can compound your wealth faster and sleep better at night by using GIFT City to diversify your investments across developed countries.

One of the first things that you learn in an undergraduate economics course is that fast-growing developing economies, like India, tend to have faster inflation than slower-growing developed economies. As a result, the currencies of such developing countries depreciate steadily to keep the said economy’s exports competitive in the world market.

Whilst there are more complicated theorems in economics which shed light on this phenomenon, e.g., the Stolper-Samuelson Theorem, the basic construct of higher inflation in India leading to faster INR depreciation has held up well since 1991 and is likely to hold up well in the years ahead. In any given 10-year cycle, the INR gives up around 40% of its value to the USD.

Now, given that the Government of India takes away a third of your income through income taxes and then another 15% through GST, you only have half of your income left in your hand. Out of that, if 40% goes to pay for INR depreciation, then your remaining income in the currency that really matters – the USD – is only 30 cents out of every USD 1 you earned. With that meagre 30 cents, you have to finance your daily lifestyle and pay for long-term goals like your children’s university education abroad and your retirement.

But what if you decided – like me – to say that “I don’t want to live like this. I want to save most of my post-tax income in a currency that does not give up a third of its value every decade.”? If you took such a stance, two good things would happen to you.

Firstly, your wealth – both in INR and in USD – would compound much faster. An Indian investor with an equity portfolio split 50:50 between the Nifty 50 & the S&P 500 has historically compounded wealth much faster over the past 20 years relative to more insular Indian and American investors who have decided they will stick to their ‘home countries’ (Note: Past performance is not a guarantee.)

Secondly, you are likely to sleep better at night as the volatility of your portfolio will reduce (relative to what it would have been had you just stuck to investing in India). As a result, your return, adjusted for the level of risk or volatility you are taking on, would jump. This is what the late great Harry Markowitz called the “free lunch in Finance,” and this is why he got the Nobel Prize in 1990.

All of this good economics was very theoretical for an Indian resident until the Government of India hit the accelerator on economic reforms three years ago and: (a) cut capital gains taxes sharply on overseas investing; (b) created in GIFT City (in Gujarat) a cost-efficient venue for overseas investing; and (c) allowed Indian entities to invest up to half of their net worth abroad.

Thanks to the reforms expedited by the Government of India, we are able to diversify globally in a cost-efficient and tax-efficient manner, which was NOT possible until a couple of years ago. This is life-changing and wealth-enhancing for all of us.

Shri Samir Agarwal said that when equity markets approach all-time highs, the mood is rarely celebratory. It is reflective — sometimes uneasy.

Before answering where to invest in 2026, it is worth stepping back to understand what kind of economy and market India has become. Markets do not operate in isolation. They are forward-looking mechanisms that anticipate economic outcomes but are ultimately disciplined by earnings and cash flows. Without understanding the economy beneath the market, any forward-looking view remains incomplete.

The global backdrop remains complex. Geopolitical conflicts, trade tensions, and supply-chain realignments persist. What has changed, however, is the nature of risk. Over the last few years, the shock was not conflict itself but its suddenness. Today, many risks are visible, debated, and increasingly priced. The world is not risk-free, but it is transitioning from unknown shocks to known risks.

Against this backdrop, India’s macro position stands out. India remains the fastest-growing large economy, with real GDP growth expectations around 6%–6.5%, well ahead of global peers. Importantly, growth is now domestically anchored. Public investment has played a decisive role: central government capital expenditure has been frontloaded in FY26 with +30% year-over-year growth in public capex from April to October, reinforcing momentum in the infrastructure space. Inflation dynamics have also improved materially. Headline CPI, which peaked above 6.5% in 2022, has moderated closer to the 4% range, allowing monetary policy to pivot from restraint toward growth support. After a prolonged tightening cycle, the interest-rate environment has begun to ease from elevated levels, improving borrowing costs, project viability, and credit demand — especially for capital-intensive sectors.

Perhaps the most under-appreciated shift has been in balance sheets. Over the last four years, corporate India prioritised repair over expansion. According to rating-agency data, median corporate gearing has fallen to around 0.5x, while interest-coverage ratios have risen above 5x, near multi-decade highs. Banks enter this cycle well capitalised, profitable, and disciplined in underwriting risk. This matters because every sustained growth cycle in India’s past was eventually derailed by financial excess. This time, the system enters a growth phase with clean balance sheets, not stressed ones.

History offers a useful lens. Over three decades of Indian equity markets, sector leadership has rotated, but the engines of wealth creation have remained remarkably consistent — financial services, consumption, technology, industrial platforms, and healthcare. These sectors have compounded wealth across cycles because they sit at the intersection of structural demand, scalability, and balance-sheet strength.

Shri Girdhari Lal Goenka, Chairman, Council on Capital Market, MCCI, in his Welcome Address, said that India has a rapidly growing base of stock market investors. Both trailing and forward Price / Earnings (P/E) ratios are on the higher side. While the proportion of holdings of Foreign Portfolio Investors has declined somewhat, the proportion of holdings of Domestic Institutional Investors has increased to record levels. 

Shri Smarajit Mitra, Chairman, Council on Banking, Finance & Insurance, MCCI, in his Theme Address, said that it is difficult to gauge how the market will react as it may not be in sync with the economy. However, investors want the investment to grow but not exponentially.

The session ended with a hearty Vote of Thanks proposed by Shri Sunil Singh, Co-Chairman, Council on Banking, Finance & Insurance, MCCI. He said that the outlook for Indian equities is positive, buoyed by economic growth and strong fundamentals.