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Budget 2026 may not have announced flashy tax cuts for overseas investing, but it has quietly reshaped the landscape for Indian investors with global ambitions.
From a one-time six-month compliance window to regularise undisclosed foreign assets, to the strategic tailwinds emerging from India’s trade agreements with the US and the EU, the policy direction signals a clear intent — make cross-border investing more structured, transparent, and mainstream.
In this edition of ETMarkets Smart Talk, Bhaskar Hazra, Joint MD & CEO, Systematix Group, breaks down what the tax amnesty means for global portfolios, whether the India–US and India–EU trade deals justify fresh overseas allocations, how India’s premium valuations stack up against global markets, and why currency volatility could alter return expectations in 2026.
He also outlines how investors should think about asset allocation across India, the US, and commodities in a year where compliance clarity improves — but diversification discipline remains essential. Edited Excerpts –
Q) How is the Budget 2026 turned out for Indian investors investing in global markets?
A) The Budget 2026 has given a much needed relaxation for the disclosure by allowing a one-time 6 months window for tax payers to voluntarily regularize undisclosed foreign holdings. No prosecution will be initiated for undisclosed foreign movable assets (excluding immovable property) if their aggregate value is less than ₹20 lakh.
While there is no new tax cut specifically for US stock investments, the overall direction of policy is clearly toward easing cross-border financial rules, a positive signal for market participants.
The combination of better tax clarity and the compliance amnesty window helps make international assets feel less risky and more mainstream for Indian investors.
For those who have hesitated due to past non-reporting or uncertainty about regulations, this budget removes a major roadblock, making it an opportune moment to properly structure and declare global investment portfolios going forward.
Q) We have 2 major trade deals for India one from EU and the other from US. The big trigger came in the form India-US trade deal which lifted Indian market. Does this make a strong case for investing in either country?
A) Both deals improve India's trade positioning, but neither automatically makes US or EU markets more attractive for broad-based investment. The EU-India FTA is comprehensive, eliminating tariffs on over 90% of bilateral trade across 144 subsectors and creating a $27 trillion combined market.
However, it requires ratification with uncertain timelines. The US-India deal is narrower and more tactical, reducing tariffs from 50% to 18% on Indian goods, but details remain scarce and legal authority unclear.
For investors, the real opportunity lies in sector-specific plays rather than country-level bets. Indian export sectors - pharmaceuticals, textiles, IT services, and marine products, are clear beneficiaries.
Within Europe, the improved outlook favours Eurozone banks, utilities, and manufacturing mid-caps, while luxury automakers and export-oriented auto ancillaries stand to gain from enhanced market access.
For example, European luxury OEMs benefit from tariff elimination on high-value goods, while Indian mass-market manufacturers retain structural cost advantages.
The structural direction is positive for both India and Europe, but earnings growth at the market level lags other regions.
A targeted, bottom-up approach focusing on specific beneficiaries makes more sense than overweighting these markets. Implementation risk remains and announcements don't equal execution.
For Indian investors, these deals ease global access through better compliance, but diversification logic and currency risks remain unchanged.
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) India is expensive, trading at approximately 23-24x trailing P/E compared to the emerging markets average of 12-15x. However, valuations alone don't tell the full story. This premium has persisted for years, with India's five-year average at 22-24x versus a 20-year average of 18x.
The premium reflects genuine structural advantages: consistent 6-7% GDP growth versus 3-5% for most emerging markets, corporate earnings growth expectations of 10-12% annually, political stability, and strong domestic consumption.
However, elevated valuations leave little room for error. The recent slowdown in late 2024 and foreign institutional investor outflows demonstrate vulnerability when growth moderates.
The practical reality is that India has been expensive since 2014 yet delivered strong returns, demonstrating that quality and growth matter more than valuation multiples for long-term compounding.
While elevated valuations suggest more modest forward returns compared to the double-digit gains of the past decade, they don't invalidate India's investment case. For Indian investors, the focus should shift toward sector selectivity and identifying pockets of value within the domestic market.
At the same time, a balanced approach to global diversification makes sense because different markets offer complementary exposures. US markets provide access to technology innovation, while select emerging markets offer cyclical opportunities.
The key is maintaining core India exposure while building a well-rounded portfolio that reduces concentration risk and enhances risk-adjusted returns over the long term.
Q) The big factor to consider is currency headwinds. We have seen steep depreciation of the INR 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 movements add a return layer over market performance - positive if the dollar strengthens further, negative if the rupee gains. A weaker rupee increases the INR value of US investments, but also signals that capital attraction to Indian assets may be under pressure.
We have seen a sharp depreciation of the INR against the USD as foreign investors pulled out of India. This was further exacerbated by delays in the FTA with the US and a tepid outlook on earnings growth.
As we move into 2026, the US-India FTA has been finalized and the relative underperformance of Indian markets has made valuations more attractive than they were a year ago. Any reversal of FII flows will likely result in an appreciation of the INR versus the USD, thereby adversely impacting returns in INR terms.
Despite short-term currency movements, long-term returns depend more on underlying asset performance and medium-to-long-term currency trends rather than short-term forex timing.
Beyond currency, investors must consider transaction costs and brokerage fees for US trades, tax implications (including withholding taxes on dividends and Indian taxation on global gains), and currency conversion fees.
These costs can noticeably affect net returns, especially for smaller investments. The focus should remain on long-term asset allocation rather than attempting to time currency markets
Q) If someone plans to invest say Rs. 10,00,000 or more than $11000. What should be ideal asset allocation?
A) The right allocation for ₹10 lakh isn't determined by the amount itself, but by the investor's behavioral risk profile and specific financial goals. Traditional models fail because they ignore how investors actually behave during volatility.
The goal-based approach works better than generic bucketing. For short-term goals (0-3 years) like emergency funds, allocate 100% to debt since capital preservation is non-negotiable.
For medium-term goals (3-7 years) such as home loan down payments, use 40% equity and 60% debt through hybrid funds. For long-term goals (7+ years) like retirement, allocate 70% equity (split between India and global markets), 20% debt, and 10% commodities to maximize compounding while managing volatility.
Budget 2026's compliance window makes global diversification easier, allowing 15-25% allocation to US or global equity funds for long-term goals. The key is aligning allocation with behavioral comfort and goal timelines, not chasing recent performance or following generic templates.
Q) Will commodities play a bigger role in global portfolios in 2027?
A) Commodities are likely to play a more tactical role in 2027 rather than strategic allocation, with precious metals offering the most compelling opportunities for portfolio diversification.
Gold and silver have demonstrated their value as hedges against inflation, currency fluctuations, and geopolitical uncertainty, particularly evident in recent market movements.
Recent trends highlight both the opportunity and volatility in precious metals. Silver experienced significant volatility, declining approximately 40% from its record high in January 2026.
Gold showed greater resilience, with 24K gold stabilizing around Rs 15,900-16,000 per gram after a brief 3% correction following Budget 2026.
Strong central bank buying and expectations of Federal Reserve rate cuts continue to support gold demand, with investors seeking safe-haven assets amid global economic uncertainties.
For private wealth investors in India, access to commodities remains limited - ETFs and funds of funds are primarily available only for precious metals, not industrial commodities. This makes a focused approach more practical.
A 5-10% portfolio allocation primarily through precious metals makes sense as a hedge against inflation and currency depreciation. Gold offers stability and acts as portfolio insurance, while silver provides higher volatility with potentially greater returns for risk-tolerant investors.
The key is viewing precious metals as tactical diversifiers that reduce overall portfolio risk rather than as core growth allocations.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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