New World Order: Finance or Factories?
The world may be at a once-in-a-generation system-level shift — not a crisis within the system, but a crisis of the system.
The big picture
The post-1980s USD-led hyper-globalisation era is unwinding. The US — once the guarantor of global order — is now a source of disorder.
Using Dani Rodrik’s trilemma (countries pick only 2 of: hyper-globalisation, national sovereignty, democracy):
The world is now moving to a new synthesis: sovereignty + democracy — hyper-globalisation must retreat.
Key implications
What this means for India
India followed a free-market (Smithonian) path post-1991, while China went statecraft (Hamiltonian). India’s goods trade deficit is now 8.5% of GDP — among the world’s highest. Manufacturing stagnated while services grew — but services alone can’t deliver scale or jobs.
The prescription: PSUs must lead capex, credit should shift from households to corporates, PLI spending must scale up, inflation targeting needs rethinking, the INR should stay undervalued, and tariffs need to be more aggressive. Reshoring is now a national security imperative.
Bottom line: The wave of globalism, finance and unfettered markets may be subsiding — ushering in materialisation. Factories over finance. Hamilton over Smith.
From an investor perspective, the report suggests the coming decade may favour real assets, manufacturing, defence, infrastructure, industrials, and domestic production-oriented themes over pure financialisation-led growth. It also warns that returns from global finance and elevated market valuations may moderate in a world where governments increasingly prioritise strategic scale over shareholder returns. Overall, the report positions this as a potential multi-year structural shift in the global economic order rather than a short-term cycle.
Fables and Fundamentals: A Note on Indian Equities
Bottom line: 360 ONE AMC remains constructive on Indian equities. Here’s why.
Returns in context:
India has underperformed EM over 3 years — but that outperformance is almost entirely Korea and Taiwan riding Gen-AI. Over 5 and 10 years, India comfortably leads. Choose your timeframe carefully.
The AI angle — India is not sitting it out
Korea/Taiwan forward earnings are priced for 74% and 25% growth — essentially a pure AI bet. India’s forward estimate is a more measured 16%. That’s resilience, not weakness. India ranks 3rd globally on Stanford’s AI Vibrancy Index (up from 7th). The real opportunity: data centres and energy. India generates 20% of the world’s data but has just 3% of DC capacity. DC capacity is set to grow from 1.5 GW today to 15–17 GW by 2035.
IT services — a transition, not a collapse
AI is compressing legacy revenues while new AI-native work scales up. The inflexion point is approaching. Firms pivoting to outcome-based models will re-rate. Notably, BPO — expected to be most disrupted — is actually doing well, with strong hiring, as lower unit costs expand outsourcing.
Valuations — the froth has cleared
The rupee
Sharp FY26 depreciation was driven by FPI outflows and FDI exits. Both pressures should ease. REER is meaningfully below 100 — rupee is undervalued and unlikely to remain a headwind.
The note concludes that while market cycles and volatility are inevitable, India continues to stand out on long-term growth, earnings resilience, improving fundamentals, and structural economic potential — with India projected to remain one of the fastest growing major economies globally over the next decade.
Bottom line: Stronger fundamentals, Cheaper valuations, Undervalued currency. India’s bull-bear index is near extreme bearish — historically a good time to lean in. IMF projects India’s real GDP at 6.5% CAGR through 2031 — highest among all major economies.
Why This May Be The Right Time To Own Rupee Assets
Sharing a few key insights from a recent market note by DSP Asset Managers:
Key takeaway:
Periods of pessimism around the Rupee and foreign flows have historically created attractive entry points for long-term investors. Current macro data suggests India’s structural strengths digital economy, services exports, remittances, resilient corporate profitability and improving inflation dynamics — continue to remain intact.
A Final Word – this may be a more favourable phase to gradually accumulate quality Rupee-denominated assets rather than position aggressively against them.
Conventional wisdom often suggests staying cautious when the rupee depreciates sharply. However, historical data paints a different picture.
Over the past 15+ years, whenever the INR has weakened by ~15% or more against the USD, the broader Indian equity market (Nifty 500 TRI) has subsequently delivered strong above-average returns over the next 1, 3 & 5 years.
While currency weakness can create short-term uncertainty, it has often coincided with periods that eventually turned out to be attractive long-term investment opportunities for disciplined long term investors.
A good reminder that market sentiment & long-term outcomes are often very different.
India performance versus other Emerging Markets on 3-year returns is the lowest in 20 years
The last time we underperformed by this much was in conditions with similar headlines (2013-14):
– High oil prices, inflation
– Rising global interest rates
– Weakening Rupee
– India was part of the “Fragile Five” (FF) economies (Brazil, India, Indonesia, South Africa,Turkey).
Interesting Analysis
The DXY – the US Dollar Index – just hit its lowest level in over three years. For those tracking global flows into emerging markets, this is worth paying attention to.
A quick look at the last five years tells an interesting story.
When the dollar surged to 115 in 2022, emerging markets broadly took a hit. Capital flew back to the US chasing yield. India was not immune – but it held up better than most, supported by relatively strong domestic earnings and a resilient macroeconomic backdrop.
Then came an interesting divergence. As the dollar plateaued, India ran ahead of the broader EM pack -MSCI India significantly outperforming MSCI EM through 2023 and into 2024. That outperformance was driven less by global tailwinds and more by India’s own story – consumption, infrastructure spend, and a financialisation of savings that kept domestic flows strong.
Fast forward to today – the dollar has weakened sharply, and this time it is broader EM that is moving. MSCI EM has broken out to multi-year highs. India, after a strong run, is in a consolidation phase.
Here is how one can read this:
→ Dollar weakness historically lifts all EM boats – but not equally or at the same time. Right now, markets that underperformed India during 2022-2024 are catching up, which is normal
← India’s valuation premium to EM peers built up over two strong years is now compressing – that’s healthy, not alarming
→ The next leg for India will likely need to be earned through earnings delivery, not just macro tailwinds or narrative
→ For long-term allocators, the more useful frame may be shifting – India looks less like a high-beta EM trade and more like a distinct allocation with its own internal drivers
Markets are complex and the dollar’s trajectory is far from certain. But if you are thinking about where global flows go in a world of sustained dollar weakness – this chart is a good place to start the conversation.
Three Key Drivers of the Sell-off
1. Hawkish Fed (Higher-for-longer rates)
2. Strong US Dollar
3. Oil Shock Paradox
Silver Outlook
Technical Levels to Watch (Gold)
Important Market Signal
Outlook
Short Term (1–3 months)
Medium Term (6–12 months)
Bottom Line
Markets:
Conclusion:
Over the last couple of weeks there have been lot of news around certain large private credit funds in US stopping redemptions. In that context this is a brilliant read on how the Indian private credit funds are positioned and implications for Indian investors.
History shows wars & crises don’t always crush Indian markets…
In 7 out of 8 major conflicts since 1980, Sensex gave positive returns in the 12 months after.
Many big dips actually turned out to be strong buying opportunities.
Worth a quick read → attached PDF from Marathon Trends (March 2026)
Three recent reads, Different themes – A similar undertone: discipline matters.
Ruchir Sharma on Gold (in Financial Times)
He suggests that gold’s recent surge appears increasingly driven by narrative strength rather than traditional fundamentals — which makes sentiment a bigger variable than economics.
Debashish Basu on Small Caps (in Business Standard)
He notes that while prices have corrected, select fundamentally improving small caps may begin to look interesting as valuations reset across the cycle.
S. Naren on Investing Framework
His reminder: long-term outcomes tend to favour those who adapt to cycles rather than anchor to a fixed style.
Different subjects, Same quiet lesson – Markets don’t just test ideas — they test process and temperament.
Over time, edge rarely comes from having more information – It comes from clarity of framework, valuation discipline, and the ability to stay measured when narratives get loud.
Something to Ponder upon from the chart –
1. Feb 2016, ~REER-95, MSCI India one year forward return +26.3%
2. Oct 2018, ~REER-94, MSCI India one year forward return +17.5%
3. Feb 2023,~REER-96, MSCI India one year forward return +36.7%
𝗔𝗿𝗲 we near 𝗮 Market 𝗕𝗼𝘁𝘁𝗼𝗺 𝗼𝗿 more 𝗰𝗼𝗿𝗿𝗲𝗰𝘁𝗶𝗼𝗻𝘀 𝗺𝗮𝘆 𝗯𝗲 𝘄𝗶𝘁𝗻𝗲𝘀𝘀𝗲𝗱???
1. Current macros are stronger than ever in this decade – Economy is currently under a goldilocks phase i.e. Fastest growing major economy with balanced inflation. At present RBI is managing the forex reserves of 680-700 billion dollars; highest ever.
2. Corporates, Households, Banks & Government balance sheets are stronger than ever
3. Indian Equity Valuations have cooled off and are trading at long term averages. FY27 PE is 19x, whereas FY28 PE is 17.5x
4. Earnings have started picking up after a prolonged consolidation of 7-8 quarters. For FY27/28 Nifty expected earnings growth is 16%, followed Mid cap 22% and small cap 23% on CAGR basis
5. In the last 10 days, the government has signed two major trade deals ,which are FTA with EU and trade deal with US. This was a big reason for markets to be volatile & subdued for over 12 / 15 months.
*But, where are we on earnings at the moment? *
– Nifty FY26e EPS to be 1200-1210 & Nifty FY26e PE to be 21-22x So, at the higher side of EPS At 21x -Nifty to be at 25,410 & At 22x – Nifty to be at 26,620. The current Nifty level is 25,320 at 22x PE.
Hence, not expecting anything substantially in the next 2 months from the Nifty as the scope for PE re-rating and returns will be based on earnings going ahead, which is a key thing to watch-out for from here.
Also, sharing an interesting table which talks about past corrections over the 15 years owing to various reasons but in hindsight all of them look like they were great opportunities to invest / participate in Indian equities.
Keep doing top-ups in high quality MFs / AIFs which are able to capture this opportunity of a correction now.
Sharing a good infographic on the recent volatile price action of precious metals (Gold / Silver). Interesting read.
India is currently witnessing a unique shift in its financial markets that defies the traditional rules of investing. In the past, when FIIs pulled their money out, the Indian market would usually crash; Now, everyday Indian investors and local funds are so active that they are absorbing that selling pressure without the market breaking a sweat.
Markets today are driven less by traditional economic logic and more by liquidity, Inclusion of AI & High Growth companies and geopolitics resulting in a shift away from traditional valuation discipline. Consider the Nifty 500 index, its overall PE multiple has not changed materially over the past decade but its composition in terms of valuation has shifted significantly. The post-COVID world is meaningfully different, marked by multiple dislocations that call for greater rationality, patience, and an acceptance that broad macro index based signals are far less reliable guides than they once were.
• Ten years ago, stocks with more than 50x trailing PE made up less than 5% of the index. Today, that figure has risen to approximately 23%.
• Conversely, stocks with less than 15x trailing PE used to be 30% of the index, which has now reduced to 13%.
• The high growth companies that have now a place in the index, have significantly contributed in the earnings growth of the index.
Secondly, the last 5 years (2021-25), has been the golden period for the Indian equity market due to high earnings growth coupled with returns. During this period, earnings growth were in mid-twenties across the board and the same was seen the performance of the indices and the portfolio. Highest numbers of high growth companies were emerged and took place in the index weightage, which slightly elevated the valuation. Still the last 5 year avg. PE multiple is almost trading with its 10-yr or 15-yr average. But the last 5 year earnings growth is far higher than the other period earnings growth. Hence, if the PE multiple of Nifty Indices have shifted higher, earnings growth band has also shifted from lower double digit to mid-twenties band.
Nifty’s P/E keeps rising, it is not just earnings slowdown, it is about the index composition
• Low P/E stocks are getting kicked out of the index
• High P/E stocks are getting added
• Excluded stocks: ~20x P/E Included stocks: ~40x P/E
• So even if earnings do not grow much, index valuation goes up automatically. That is why Nifty’s average P/E has moved from 16–18x to ~20x. Index composition matters more than we think.
And despite all these, Indian Equity Markets have started trading at FAIR valuation on 5-year basis in comparison to global market. Over the next couple of years, expected earnings growth is in double digits, which makes markets to be available at decent valuation
Portfolios (MFs / PMS / AIFs) recommended by us at Clay Financial Services are far better positioned in terms of expected earnings growth & valuation metrics.
Financial markets attract forecasts the way storms attract lightning. Every year, investors are told where markets will go, when they will crash, and what will be the next big opportunity. For the average investor, this constant stream of confident predictions often causes more harm than help.
John Kenneth Galbraith once captured this problem perfectly when he said “The only function of economic forecasting is to make astrology look respectable.”
The Problem With Forecasts
Many forecasters become popular not because they are consistently right, but because they are consistently loud.
Robert Kiyosaki has warned of the biggest market crash “coming soon” for more than two decades. He predicted collapses in 2002, 2011, 2016, 2020, 2022 and again in recent years. Sometimes markets did fall, but never in the way or at the time he forecasted. Meanwhile, long term investors who stayed invested saw wealth compound quietly. The damage here is not that the forecast was wrong once. It is that repeated fear keeps average investors permanently underinvested.
Harry Dent built demographic models predicting market collapse as populations aged. His forecasts of Dow 3000 or worse came just before one of the strongest bull markets in history. The model sounded logical. The timing was disastrous.
Nouriel Roubini correctly warned about the 2008 crisis, but then continued to forecast global depressions that never arrived. One correct call created a reputation that did not repeat itself. Investors who followed him stayed defensive for years while markets moved higher.
Marc Faber Known as “Dr Doom”, Faber predicted hyperinflation and market collapse for over a decade. Inflation eventually rose, but not in the catastrophic way forecasted. Markets adapted, businesses adjusted, and investors who waited for the perfect collapse missed years of compounding.
Forecasting rewards confidence, not accuracy. Media platforms amplify extreme views because fear and certainty attract attention.
Why Average Investors Suffer the Most ?
Professional investors can afford to be wrong. They diversify, rebalance, and manage risk. The average investor cannot. For the average investor, forecasts lead to:
– Waiting endlessly for the “right time”
– Selling after fear has already peaked
– Missing recoveries because they feel “this time is different”
– Constant switching between strategies
– Trying to predict markets turns investing into a stressful guessing game.
The Real Mistake: Trying to Hit the Ball Out of the Park
Most average investors do not need extraordinary returns. They need reasonable returns achieved consistently. Trying to time the market or make one big perfect call is like trying to hit every ball for a six. Professionals may attempt this. Average investors should not. The biggest enemy is not low returns. It is not staying invested long enough.
What the Average Investor Should Do Instead ?
Invest Incrementally
Regular investing smooths out mistakes. You buy when markets are high, low, and in between. Over time, the average works in your favor.
Accept Being Average
You do not need to predict recessions, interest rates, or market tops. Accepting uncertainty is a strength, not a weakness.
Focus on Process, Not Predictions
A simple, repeatable investment process beats a brilliant forecast that fails. Control what you can.. asset allocation, costs, discipline, and patience matter far more than forecasts.
The Quiet Truth About Wealth Creation
Markets reward time, not timing. Most wealth is built not by predicting crashes or booms, but by staying invested through boredom, fear, and noise. The average investor suffers not because markets are unfair, but because forecasts tempt them to believe they can outsmart uncertainty. Incremental investing may not sound exciting. But it works. And in investing, boring done consistently beats brilliant done occasionally.
While Nifty is soaring near to all time highs, small caps – Majority of the portfolio stocks are going down. This is not the first time the index level correction is different than that of underlying portfolio stocks.
Let’s take Nifty small cap 250 index history –
• In 2007 – the Index rallied 94%; but in 2008 – it was 69% down because of global financial crisis
• In 2009 – the Index rallied 113%, almost index become doubled, stocks performed like never before; this was followed by muted growth in 2010 – only 16%; then in 2011 – It came down by 37%.
• This was followed by 2014 – where rally was 69% & 2017 – rally of 57%; downfall started for 2 years in 2018 – downward movement of 26% & in 2019 downward movement of 9%, which were followed by wonderful years of upward rally – 2020 – 25%, 2021 – 61%, 2024 – 26%
• Then came 2025 – Negative returns of 9%
If you see the history – negative years are very less & this time number of stocks down out of Nifty 250 index are very high, so potential of rally in upcoming years is high.
Also, small caps always look scary in the middle of a downward cycle, but are brilliant in hindsight. Every deep fall / correction has led to an even stronger comeback. Patience is the only edge that most investors ignore. Stay invested, top-up if cash flow & risk profile allows and if you can hold your investments for a period of 4 – 5 years.
Sharing a couple of interesting charts from ICICI Direct & Funds India for your reading & analysis which presents data that reflects a similar view.
Sharing 2 interesting articles (India in 2026 by Akash Prakash & 2 Sides of India’s Stock Market Story by Neeraj Kaushal). Both are very good & relevant read.
Neeraj in her article talks about the 4 reasons why FPIs have shunned Indian stock markets, despite it being one of the fastest growth story.
Akash in his article talks about where he sees Indian markets & economy in 2026 and why he believes India could be doing well in the year 2026 as compared to 2025.
1) Persistent FII selling – FIIs have sold over USD 30 bn in the past 14 months. YTD they have sold around USD 25 bn in 2025 as compared to USD 15 bn in 2024. FIIs now hold only 16.71% of the NSE listed equities, which is at a 13 year low.
2) INR has drastically depreciated to USD following the FII outflows & no clarity on the US-India Trade Deal outcome yet. The recent trade deficit of USD 42 bn & record high Gold imports has added a further pressure to the currency. INR is clearly now undervalued to USD as per REER (Real Effective Exchange Rate), a strong recovery is expected in INR from hereon.
3) FIIs investment cycles have become erratic, short as well as unpredictable, which is further putting pressure on the INR.
4) December is rarely a good month from a FII inflow perspective as it being a Christmas month; makes it a lazy activity month.
5) Fed Meeting likely outcome this week is also keeping the markets in a jitter, one can expect a 25 basis FED cut with a probability of around 60%.
6) Too many IPOs are creating s liquidity shortage and constant supply of paper is there as well.
Way Forward from here
– The evens are much stronger than the odds, and any fresh positive trigger can make markets rally to a good upmove.
– Recent move by RBI to inject INR 1 Lac crore through OMO’s and a USD/INR 5 Billion Swap will provide enough liquidity within the banking system. Aided by a 25 basis Repo Cut which will further help the lending rates to go lower and it should spur the demand.
– With the 8th Pay commission coming in, recent GST rate rationalisation & tax slab changes made in the last budget, the consumption demand / story will continue to have a big boost. This will also aid to drive double digit Corporate earnings growth. Indian consumption accounts for over 65% of our economic activity.
– GDP base year change from 2011-12 to 2022-23 will help reflect the actual GDP growth for India in Q3, as we continue to evolve dynamically as an economy. It’s important to reset the expectations, the previous months/quarters high base numbers will impact the percentage growth to be lower quarter by quarter, but not in value & volume terms, which matters the most. So, we still continue to grow as the fastest economy in the world with very low inflation / inflation at its lowest level.
Final word
– It’s a good time to accumulate equities with a 3 – 5 year horizon.
– Build portfolios though Flexi Cap MFs & selective small & mid cap AIFs
Indian rupee recently corrected to the levels of 90 and what market think of RBI.
1). REER which measures the real value of currency value adjusted of inflation. In Nov 2024 it was at 108% was artificially strong for multiple years, today it’s at 97% which is undervalued. For the first time Indian exports have become competitive at global stage.
2) Rupee depreciated against Dollar by 2.8% every year since 2000, and since 2020 it’s at 3.3% averaged out yearly. In short term it looks steep depreciation but in long term scale its a pretty normal drift.
3). Global picture, FII pulled out roughly 17billion dollars from Indian Markets this year, US INDIA trade deal stuck with tariff threats looming and US Dollar is still holding strong because US Interest rate at band of 4-5%.
All the three forces are pushing the rupee down at same time. In such situation if RBI tries to defend the Rupee levels by selling its Dollar reserves, they would loose twice. Firstly because of drained dollars and secondly by keeping the Rupee artificially strong, which hurts exports and growth.
Real story is not of Rupee collapse, it’s finally RBI has stopped over protecting the Rupee and letting the currency do its job.
Aggregate capex of 1,899 nonfinancial companies rose 11% to 9.4 trillion rupees ($105.34 billion) in fiscal year 2024-25, the highest spend in at least seven years, according to a CareEdge Ratings report on Nov. 24. It lists two more positive indicators. Order books of capital goods companies expanded at 20.7% last fiscal and the momentum has been maintained this year. Also, corporate investment announcements between April to September are at a decade high of 15.1 trillion rupees, led by manufacturing firms. (I’m aware that only a fraction of announcements convert into projects.)
CareEdge Chief Economist Rajani Sinha is wary of using the cliched metaphor “green shoots,” but that’s exactly what she’s seeing across energy, commodities and data centers. “We are not saying there is a sharp pickup, we are being cautious and saying things have improved,” she said to me over the phone.
Caution is necessary as some spends may be skewed by theeconomic slowdown around the national election last year, or the end of a sectoral investment cycle. For example, an Axis Bank study of the top 200 listed companies (nonfinancial) shows a weak 5% capex growth in the first half of this fiscal year. But adjusted for the end-of-5G investments by telecom companies and Reliance Industries, the investment growth rate climbs to 15% year-on-year. Utilities and industrials saw strong capex growth, the bank’s economists said in a Nov. 24 report.
There’s clear confirmation of the trend in some core sectors. For example, cement capacity addition is estimated to rise 75% over this fiscal year and next, costing approximately 1.2 trillion rupees, according to Crisil Ratings. In the renewable energy sector (including battery storage), capex is expected to grow at a compounded annual growth rate of 13% over the next two years, as per the CareEdge report. Then there’s data centers, which in recent weeks have drawn long-term investment commitments of close to $30 billion from Google, TCS, TPG, Reliance Industries and Brookfield, among others.
“The private capex cycle is at an inflection point,” Morgan Stanley economists said in a recent report. “We expect these favorable fundamentals to drive the next leg of the capex up-cycle, even as the peak is likely to be lower than the F2004-08 cycle.”
