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Why The Next Decade Isnt Just About India Ft Saurabh Mukherjea

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TITLE: Why the Next Decade Isn’t Just About India ft. Saurabh Mukherjea CHANNEL: Wealth By Motilal Oswal DATE: 2026-03-28 ---TRANSCRIPT--- How do investors even decide which [music] countries to look at, which sectors to look at?

As India develops, every decade new need emerges. The new financial necessity emerges in the Indian middle class, upper middle class. And when these two things come together, you tend to get a a decadal boom. I just want to understand what’s [music] the view on China. China gives you There are some verified reports and fund houses saying that this is going to be the India decade [music] for investors. Why then do you believe that it’s not in India? When we started investing globally in October ‘22, I didn’t bargain for the fact that ‘23, [music] ‘24, ‘25, you’ll get a colossal boom in defense, aerospace, and power spending in Europe and America. What percentage [music] of an Indian affluent family’s portfolio typically would you advise being with global exposure? Over the last two decades, Indian wealth has moved in distinct waves. 2004 to 14 was the decade of real estate. 2014 to 24 belonged to Indian equities. But will 2024 to 2034 be the decade that affluent Indian families go global? To discuss this structural shift, I’m joined by Saurabh Mukherjee. He’s the founder and chief investment officer of Marcellus Investment Managers, a firm that he built with a clear philosophy around long-term high-quality investing. He’s the best-selling author of The Unusual Billionaires and The Coffee Can Investing book, and has been at the forefront of shaping how Indian investors think about compounding and capital allocation. So today we’ll unpack why going global may be less of a choice and more of an inevitability for affluent Indian families over the next decade. Let’s dive in. So Saurabh, let’s get straight to it. I just want to understand what is the case for rethinking the India-only portfolio. I know you’re talking about how core themes every 10 years change. Right. Can you elaborate a little bit more on that and say tell us why global large caps you think merit a place in the portfolio? Sure. It’s not just global large caps, I mean I think even Western small and mid caps deserve a place. But let me just back up a little bit and give you some context, right? So so I migrated to India in 2008 and I was fortunate to basically see the second half of a epic real estate boom, right? I would say 2004 to 14 was an epic real estate boom in in in India. In Mumbai, we saw South Bombay real estate go to levels which were rivaling some other global money centers such as Singapore, Hong Kong, Mumbai, right? And then I was equally fortunate to see the the Indian real estate the Indian equities boom. So ‘04 to ‘14, real estate boom. ‘14 to ‘24, the Indian equities boom. MF sahi hai. The NDA comes to power in 2014, big surge in in equities, right? And as I sat back and looked at India’s financial ecosystem, I when I realized that every decade the core investment theme in India shifts, right? And and as the team at Marcellus and I delved deep deeper into the subject, we realized there are two moving parts which result in the core investment theme shifting every decade or so. The first is obviously valuation, right? So if for a decade, if for an extended period of time, an asset class gets pounded, naturally by the end of that decade, valuations tend to be quite tasty, quite juicy in that, right? And the second aspect is as India develops, as lifestyles change, every decade or so a new need emerges. A new financial necessity emerges in the Indian middle class, upper middle class. And when these two things come together, you tend to get a a decadal boom, right? So just to take an example, 95-96 Bombay real estate started tanking, right? And between ‘95-96 to roughly 2003, Mumbai real estate halved, right? Residential, commercial halved. I remember ‘96, the Air India building in in Nariman Point on Marine Drive, ‘96, the Air India building was amongst the most expensive buildings in the world, right? I used to study at the LSE then. I remember reading in the FT, Air India building on on Marine Drive amongst the most expensive real estate in the world. And that was in a way the top of that real estate cycle. So from ‘95-96 all the way to 2004, real estate halves. Now, by 2004, the Indian middle had had 13-14 good years courtesy the IT boom that had started in the early ’90s. Private sector banks emerged in the mid-’90s. That created jobs, prosperity, easy home loans. The whole advertising-driven consumption boom had picked up pace through the ’90s into the naughties. So you had a decent-sized middle class which was affluent, which needed nice homes to stay in. So combination of attractive real estate valuations year 2003-2004, combination of attractive real estate valuations, the middle class’s need to find good space to live in. Private sector banks offering home loans, and thus you had a 2004 to 14 boom in real estate, which gave, even the unprofessional amateur real estate investor would have made 20% CAGR, right? So valuations attractive and a core social need, right? And the two came together to create an uplift in real estate for ‘04 to ‘14. Something similar happened in equities from ‘14 to ‘24, domestic equities I’m talking about, right? So if you look back at 2007 to ‘13, Indian equities gave zero returns, right? Zero returns 2007 to ‘13 in Indian equities. And yet by 2000 by the time the NDA came to power in 2014, again the Indian middle class doing reasonably well, the same same story around jobs, IT services, banking, etc. So need for long-term savings, attractive valuations on the back of seven years of zero returns in Indian equities, attractive valuations in ‘14, and boom, you get 10 years of of super returns at the Nifty level. I think 10 consecutive years of positive returns in the Nifty, right? We are basically having that part at the end of that 10 years of consecutive positive returns. So so three years ago I I realized something similar was likely to happen in in global investing and specifically global small and mid cap. So if you look at first let’s address the need aspect, right? Many of those watching, their children are going to study abroad or probably already studying abroad. Many of those watching, they will have at least one holiday abroad every year. The equipment we are using for this podcast is all imported. Most of the phones in our pockets are imported. Even if the phone is assembled in India, everything inside the phone comes from abroad. If you and I were to fly take a flight in India, the plane would be imported. The the fuel inside that would be imported. The apps that we use, right? Whether it’s YouTube, Spotify, everything in our lives really is imported, right? So the first thing I realized and COVID was a good time because it was a time for reflection. 2025 2021 I realized that for the sort of society that you and I are living in, 70% of our spending goes on effectively dollar items. I might buy my iPhone at a Apple store in Mumbai and I might think I’m paying for it in rupees, but effectively it’s a Yeah. dollar item, right? I might buy a air ticket from Mumbai to Bangalore and think I’m paying in rupees, but effectively it’s a dollar item, right? So I said there is a great need for dollar savings because our outgo is in dollars, right? And given that the Indian rupee gives up typically 40% to the dollar every decade, there’s a need for dollar savings, right? In parallel I realized in in 2022 and even more clearly in 2023 that US and European small caps have had 25 years of valuation de-rating. US and European small caps have had 25 years of valuation de-rating relative to large caps such as say Nvidia, right? So companies like Nvidia are richly valued. I don’t think we can we can debate that. That’s I think reasonably clear. Nvidia is a super company, but it’s richly companies in Europe and America which are trading, just to keep it simple, at say 15 PE and are growing earnings at 15%. And and that’s when the the bridge joined in my head and said I could see there’s a need, there’s attractive valuations, and that’s when this thesis formed that hey, we’ll now have a decade of of of global investing by affluent Indian families. Credit to our regulators, our authorities, there’s been a raft of changes from our central bank, from the authorities in GIFT City, from the finance ministry, which have made this this shift to global investing that much more efficient, lower cost, and made it tax-friendly as well. So you’ve you’ve clearly mapped out the individual decades. But I mean there are some verified, you know, reports and fund houses saying that this is going to be the India decade for investors. We’ve got the population, we’ve got you know, policies, we’ve got frameworks, we’ve got technological leaps. Why then do you believe that it’s not in India? So it’ll be India’s decade in the sense that household savings are obviously going to continue booming, right? So if you just sort of you take it as you take build a simple framework, $4 trillion of GDP, assume a household savings rate, right? I’m ignoring corporate savings. Just take household savings rate of roughly 20%. Effectively, you will have the best part of a trillion dollars of savings each year coming into the ecosystem, right? Now the question is how much of that can equities take? And the answer as I think is given current valuations in India, both large cap and small cap. Remember large cap is 70 80 70% of the market. So large caps if if this is going to be India’s decade in equities of one, then large caps will have to take a lot of that flow. Given that we’re getting incrementally a trillion dollars of domestic savings a year, right? Nearly 25% of GDP or maybe a little bit less if you assume 20% of GDP, [snorts] it’s not evident to me that large cap savings can absorb more than 20, 30 billion of that. So, you’re still left with a ton of money, right? The best part of a trillion dollars. Where will that money go? Some of that, as we can see, is already going into gold, which is actually contributing to part of our balance of payments challenge that the country faces, right? And it’s very difficult to stop that. If households want gold cuz they’re saying equities are expensive, very difficult to stop that. We also can see that a lot of that is going into real estate. And once again, real estate valuations are looking punchy. But the such is the enormity of India’s household savings that even if this even if domestic savings do really, really well, I reckon we will get over the next 10 years, we’ll comfortably get 100 billion dollars plus leaving the country going into global equities. And and it’s not surprising therefore that the global majors, the BlackRocks of the world, have rocked up in India and have created alliances which will allow them Okay. to to to uh help Indians invest globally. So, through tech solutions created by the global majors and through, say, offerings for the high net worth uh end of the market by people like us or or or my host here, right? We will have Indian families going global. The diversification argument is very compelling, right? Yeah, I mean, if if I may, Saurabh, I’m so sorry to interrupt you, but you know, there’s also uh this latest report by the World Bank and they’ve said, I’m just reading it out, “The global economy is on course to record its worst half decade of growth in 30 years, and there’s going to be a major course correction, and the 2020s will go down as a decade of wasted opportunity.” Does this not worry you when you’re advocating global exposure? the World Bank’s sort my life has seen, whenever the World Bank says something, right? Always do the opposite, right? So, so So, I remember as a child, whenever I learned this very early in life, whenever the World Bank was bearish on India, I figured out that was the best time to invest in India. Whenever the World Bank is bullish on any country, be really careful. So, in all seriousness, uh the multilateral institutions, right? The IMFs, the World Bank, they have a different job to the job you and I have. You and I have a job of spotting opportunities before other people do so. The multilateral institutions have a job basically to to they’re trying to generate financial stability around the planet. Right? So, the thing to focus on is opportunity, right? So, first, we discussed the valuation piece. We then discussed why Indian families, given their dollar spending needs, um are likely to go global. Uh I was then flagging diversification, right? India and America, very low correlation, right? The The These are the two only two markets, India and America, are one of the only two markets that give you double-digit dollar returns over 10, 20, and 30 years. No other market does that. But the beautiful thing in this is these two countries have low correlation, which means if you invest in both, say, roughly half your money, you can sleep better at night because at least one of the two markets is firing in your favor, and uh your compounding is not inhibited, right? So, you’re getting diversification, you’re funding your dollar spending needs. Um Now, now delving deeper into the specifics of what’s happening over there. Now, when we started investing globally in October ‘22, I hadn’t bargained for what I’m going to what I’m going to now going to tell you, right? I didn’t bargain for the fact that through ‘23, ‘24, ‘25, you’ll get a colossal boom in defense, aerospace, and power spending in Europe and America, right? What we’re seeing in Europe and America, courtesy Trump, courtesy AI, courtesy biotech, courtesy clean tech, is the biggest CapEx boom since the 1960s, right? So, somewhere around 2 trillion dollars of money is going in into uh uh aerospace, so planes, Airbus, for example, has a 10-year order book, right? GE Aerospace, which supplies engines to Airbus, has the best part of 7, 8-year order book. So, uh so, aerospace, defense, right? So, so, India itself bought uh 3 trillion rupees worth of jets from from Dassault, right? So, aerospace uh aerospace again needs jet jet engines, GE Aerospace again, the leading supplier, but it also needs drones, it also needs missiles. So, firms like Raytheon, firms like Lockheed Martin are also seeing packed order books. Then the third piece is power. So, 2022, ChatGPT arrives. In the decade prior to ChatGPT, power demand was growing at 2%. This is in the global power demand was growing at 2%. In the years since ChatGPT, power demand is growing at 4%. That extra 2% is basically 500 gigawatts of power. To install 500 gigawatts of power, you need at least 700 billion dollars of CapEx a year in the in the in the in the planet, right? So, as a result of this, firms like Alstom, firms like Siemens, they’re listed entities in France and Germany, respectively. They have 7, 8 years worth of Okay. order book, right? Now, these companies, when the when when we began investing 3 years ago at the outset and I stress again, this was a fluke. We hadn’t anticipated this. We were lucky that we were able to get into these sorts of companies at 15 PE, 16 PE, and because of the strength of the order book and the strength of the CapEx boom, we are ending up getting earnings growth in the high teens. Okay. For companies whose pre-multiples are in the mid-teens, right? So, PEG in the Indian context would be less than one, right? So, so, this piece of the Western world, it’s not just AI. In fact, less than 20% of the biggest share price generators in America of the last 10 years have been tech. Really? Right? So, the mental model is everything in America tech, tech, tech, tech, right? But if you look at the share price action, because there’s been so much action in defense, so much action in aerospace, so much action in power, less than 20% of the biggest share price generators in America Okay. last 10 years have been from the tech sector. So, you’re getting diversified plays Mhm. with a focus on heavy industrials, a focus on health care, biotech is also booming, Okay. with a focus on ultra-luxury, the rich are getting richer, even the Indian super-rich are ending up buying stuff over there. Ironically, even as this piece has happened in the West, for reasons that none of us can actually pin down accurately, domestic CapEx in India domestic CapEx sans the government, if you leave the government CapEx piece aside, domestic CapEx in India has has fizzled off. So, this dichotomy is the direction of travel in the last 3 years has been Right. in opposite directions, which is exactly why one goes global, cuz you’re diversifying. So, you know, but it’s complex to understand these global companies. I mean, you’re not just saying let’s pick out 10, like you said, tech stocks in the US and a few Chinese companies that we’ve all heard of. It’s a lot more it’s a lot deeper than that. So, based on all of your understanding, break it down for us. The Global Compounders portfolio of Marcellus, what does it comprise of? Just roughly in terms of sectors and which countries? So, so, on the complexity piece, right? One piece I find very interesting. So, if you were to gather in this in a room, say, 100 Motilal Oswal clients, right? And you ask them how many of them have iPhones, I’m pretty sure at least half the room, their hands will go up, right? Now, ask the same clientele, how many of you use products made by HAL or BEL, right? Naturally, because those are B2B companies, they’ll be very few. Similarly, if you were to meet any group of Indians, everybody effectively is a TSMC customer, cuz the chips inside the phones, in fact, the chips inside the camera that’s shooting this podcast will come from TSMC’s factory in Taiwan. Okay. Right? So, so, the Global Compounders portfolio actually is as Indian as it gets. So, if Microsoft India, which is in Global Compounders, if Microsoft India were listed, Aवन, it would comfortably be the largest company in the Nifty. Okay. Right? So, if Microsoft India were listed at, say, 20 PE, you’d end up with the last largest company in the Nifty. The point I’m driving at is we are using the products of the Global Compounders more so than we use the products of the companies listed in the Nifty. But let me now get into the question that you specifically asked. What we’ve done is we’ve diversified the portfolio and deliberately made it as non-tech as possible, right? Because we don’t want to needlessly load up on one sector. tech or there’s a So, only 20% is tech. In the US? So, it’s a mixture of European tech and American tech. So, for example, uh And and this is why national boundaries are facile now, right? So, so, ASML is listed in Holland. Every phone, every laptop, everybody watching this podcast has ever used, Okay. the circuits on that are hammered using ASML’s machines, right? So, ASML is a Dutch company, so to speak, cuz it’s listed in Holland, but it’s not really Dutch. Okay. So, well, European and So, yes, it’s listed in Europe, so I classify it as Europe, but I call it tech. So, it’s 20% is tech, including ASML, but we And what about your aero and defense and things like that? aerospace and defense, another 20%, Okay. From which countries? So, again, mixture. Airbus is listed in France, GE Aerospace is listed in America. The GE Aerospace’s engines go into planes around the world, so 75% of global jets and fighter jets have GE Aerospace. GE Aerospace’s components come from all over the world. A critical component comes from Safran, which is listed in France, I stress again, the boundaries are facile, but but 20% is defense and aerospace, because we discussed massive boom. Health care? Well, let’s go to let’s cover up industrials first, right? The third piece is So, after tech, after defense, aerospace, another 15 to 20% is industrials, because both for defense and aerospace, but also for the booming power demand piece, transmission, distribution, generation is booming. You need enormous amount of industrials. So, again, roughly 15-20% is industrials. Partly listed in Sweden, partly listed in Germany, partly listed in America, right? Then we come to financial services. So, that’s around 10%. Little bit of decent amount of Berkshire Hathaway, some of the private equity firms listed on Wall Street. And then we have 15-20% in ultra luxury. So, the number of super rich are growing at 7%. Actually, India plays a big role in this. So, the world has 3,000 billionaires of one. India officially, using the income tax returns, using listed wealth, has around 300. So, officially, we have 10% of the global billionaires. Remember, we are 3% of global GDP. India’s 3% global GDP. India’s 3% of global market cap. But we are 10% of the billionaires, right? That’s officially. I suspect And now you’re on your way to add to that list, Saurabh. Not yet. Not yet. [laughter] But unofficially, I think it’s higher. But jokes apart, the Indian billionaires Yes. Whatever the Indian billionaires are buying are listed in Paris and Milan. So, ultra luxury is a sector where America actually is a little bit Interesting. a little bit behind the curve. The French and the Italians make the handbags and the shoes and the ties and the clothes that we that we like. So, so you’d end up with a diversified portfolio. Interestingly, only 20% of the portfolio is companies with a market cap of trillion dollars and above. Okay. 20% Yeah, so 20% is what you’d call mega cap. 70-80% is companies with market cap of say 5, 10, 50, 100 billion dollars. And effectively, what we’ve tried to build is a portfolio more small and mid-cappy rather than a mega cap portfolio. Because honestly, for a mega cap portfolio, people don’t need to come to us. Yeah. They can buy the Nasdaq from their apps in India. And I’m sure our hosts will provide Nasdaq access. So, I just want to understand now for someone who’s watching and they’re saying, “Okay, what Saurabh saying makes so much sense. Now, I want to go the global route in my portfolio.” Just let’s break it down. How easy is it and how do you do it? Is it via domiciled Indian products? Is it offshore structures? Opening a brokerage account like the Interactive Brokers in the US and buying ETFs just in a simple manner? You’ve done You’ve done your research and thank you for being so on the money. So, till suppose we had met around a year ago, suppose we were doing this podcast in early ‘25, what you’re saying is spot on. Early ‘25, there were that not that many routes to access global investing in opening an Interactive Broker account or using India’s one of the brokerage apps to buy American stocks on the Nasdaq would have been the way to go, right? Now, the reason that’s a the reason that that wasn’t the greatest idea in the world was tax and it’s tax inefficient. So, if you invest abroad on your own steam through a brokerage app, right? You end up being short-term capital gains tax at your maximum marginal rate. So, the Interactive Broker account you’re saying is not tax effective. Yeah, it’s it’s tax inefficient, right? Because the short-term capital gains tax ends up being your maximum marginal rate, which for an affluent person can be pretty high, right? And the second wrinkle on that, the second aspect to appreciate is the way American law works is if you invest directly into American stocks or mutual funds and then something happens to you in India then the inheritance tax is punitive, right? So, your descendants end up losing half the investments you made, right? So, we thought carefully about this. We didn’t want to get into a high cost, high tax punitive structure for our clients. And not just we, there’s a whole bunch of other Indian manufacturers who created mutual funds in GIFT City, right? So, global mutual funds housed out of GIFT City. There are several providers. We’ll be joining that list in a month or so where we have a I think we’re the only people with a team in New York. We have American team doing the work. But it’s a mutual fund just like it’s it’s a rather than being a SEBI regulated mutual fund, this is a IFSC IFSC is the regulator of GIFT. It’s an IFSC regulated mutual fund. And just like any Indian mutual fund, you go and buy mutual funds in GIFT City and the mutual fund in turn invests into global stocks in Europe, in America, in Taiwan. Is there a minimum amount? So, in our case, $5,000 is the is the minimum. We’ve created that $5,000 minimum just to keep it small ticket and convenient. But I think there are other providers who might have lower minimums. saying MFs in GIFT City is the way to go. That’s the that’s the the most tax efficient way because if something happens to you there the American regulator, the American government can’t take away your money for inheritance tax purposes. So, how do they decide? How do investors even decide which countries to look at, which sectors to look at? So, in our case, we are doing the country allocation. But someone If someone who’s watching this says, “Hey, I want to invest globally for the first time.” My suggestion is start with the straight and the narrow. And if you you’re watching this and you don’t want to invest in a global fund for some reason, then start with the straight and the narrow, the most the most liquid global index is the S&P

  1. If you’re beginning, you’re dipping your toes in the water in the global waters for the first time, you’ve had you’ve done investing in India, now you’re dipping your toes in global waters for the first time. Start with the S&P 500. As I said, it’s easily accessible through a variety of brokerage apps. Just be careful of the tax consequences. If you don’t don’t buy and sell in less than 2 years because if you do that, the Indian government will end up taking away a big part of your gains. And be careful about the inheritance tax consequences. So, you can do this yourself, but in one difference visa-vis Indian investing is if you do this yourself there is a tax consequence that you end up suffering, which isn’t true in domestic investing, right? So, so, so there’s a bunch of fund managers, not just us in GIFT City, who are doing global allocations for you. I would suggest start by allocating into mutual funds listed in GIFT City. But if some reason you say, “Nay, I want to do this myself, could connect.” Then start with an S&P 500 ETF and you know, start dipping your toes in the global waters there. Okay, so you’re recommending that it’s better not to do this individually.

Because of the tax The tax piece is pretty So, the way I look at it, when you’re alive, the Indian government will tax you. And if you die, the Americans will tax you. Okay. What about people who say that there’s so many concerns, you know, there’s certain geographies that have so many issues like Turkey or Sri Lanka, for example. They’ve performed quite poorly. If a country is going through geopolitical tensions, does it necessarily mean that that’s an avoid or is it that it doesn’t won’t stay like that forever and you can explore it? So, look, there are There’s the whole world literally to invest in. There’s There’s only so many hours in the day even for professionals like us. So, we focus on the relevant drivers, right? What are the relevant drivers here? You, I, those watching, we want to make a decent return, right? And the data of the last 10, 20, and 30 years shows that two big markets stand out. India’s 3% of the world market, but India and America, America’s around 50% of the world market. These two markets stand out. They’re the only double-digit dollar return generators over 10, 20, and 30 years, right? So, therefore, the first piece to realize is in a If you’re If you’re building your global pot India should be a sizable sizable chunk. In my case, it’s half. And America should be a sizable chunk. In my case, it’s around 40% of my wealth, right? So, so that’s the first piece to begin with. You can go to smaller countries. And if you want to go there on holiday, that’s fine. But if you want to go there and make consistent money in in smaller countries and emerging markets, consistency in emerging markets are not something which go together, India being the sole exception, right? It’s very interesting that the two biggest return generators over the last three decades have been large free market democracies, namely the United States and India. The second piece to look for is correlation. You want to invest markets which do not move in sync with with each other. You want markets which do their own thing, right? Now, most emerging markets, Avana, Sri Lanka, Brazil tend to move in sync. When the when the cost of capital is falling globally, emerging markets tend to do well. When cost of capital is rising, when fear is rising, most emerging markets get thrashed. As I said, India’s exception. So, you want to draw You want to build a portfolio which has low correlation with each other. That’s where blending European and American small and mid-caps with an Indian portfolio works very well, right? You’re getting returns from these two geographies. Correlation is low, so you’re getting stability at the portfolio level. And you do you have enough complexity that you can manage but not so much that that your your brains will get frayed trying to figure out what’s happening in Sri Lanka or or South Africa. Okay. What about this LRS option? What if people say we’re just content with that or getting maybe, you know, some sort of a an exposure in a in Portugal and things like that? Would you advise that? I suggest focus on the LRS first. LRS is the RBI’s Liberalized Remittance Service, right? It’s a large amount of money the RBI allows everybody living in India to spend and invest globally $250,000 per PAN number per year. So, it’s a decent sum of money. So, a family of four you can invest abroad or holiday abroad to the tune of a million dollars a year, which is a vast amount of money. That’s enough for most people, including myself, to invest abroad. Now, thankfully for richer people around 12 months ago, the RBI came up with a an additional regime over and above LRS. The RBI announced something called the Overseas Portfolio Investment Regime as per which anybody corporate, so any private limited company, public limited company, any LLP, anybody corporate can invest up to 50% of their net worth abroad through GIFT City, right? Now, that’s very helpful for fam big family offices because their wealth tends to be in a corporate structure and the RBI now allows these families to put up to half of their wealth abroad and effectively you can do it even as a company. So, for example, Marcellus a big part of our balance sheet is now invested abroad through GIFT City because we tend to end up getting superior returns. Now, in this context it’s worth noting the Indian banks have office branches in GIFT City and they’re offering 4 and 1/2% dollar fixed deposits. So, if you have a company, so in my case I’m responsible of looking after Marcellus’ balance sheet as well. Rather than putting money in a rupee bank account in Mumbai I can put money in a dollar bank account for the same bank, HDFC Bank say, I can put it in a dollar bank account in GIFT and I’ll get an FD return of 4 and 1/2 assuming that the rupee gives up 3, 4, 5% of the dollar, I’m ending up getting the best part of 9% rupee returns to my FD. So, the RBI is now giving you two regimes, LRS and OPI. OPI is for body corporates. If you have spare cash, it’s useful for treasury gains and if you want to allocate half of your wealth abroad, the GIFT regime, the IFSC regime is allowing you to do that using the RBI’s OPI scheme. Okay. I just wanted to understand you spoke about India and the US and you were you said that they have delivered similar long-term returns. But despite this, in times of stress both markets react very differently. Can you elaborate? So, so let’s go deeper into this. If we look at the last 40 years, there have been two episodes of deep stress. One was the Lehman Brothers crash in 2008 and the second was the COVID crash of 2020 2020, right? Now, now these are the only two episodes ironically in the last 40 years where both India and America got hammered in unison, right? So, so that apart, these these crises apart, the two markets don’t get hammered in unison. Sometimes Americans correct and India holds up, sometimes India corrects and Americans hold up, which is why it’s it’s useful to diversify across these two markets. Now going back to say the COVID crash. Both markets recovered quickly, but the Americans recovered even quicker than us, right? And the reason for that is typically in these crises and in both the crises, the the Lehman crises and in the COVID crises the Federal Reserve tends to respond by printing money. And because the Federal Reserve floods the American market with liquidity in the event of such crises, right? I’m not saying that’s the right thing to do, that’s just simply what’s happened historically. Whenever there’s a crisis the Americans print trillions of dollars, right? I think COVID the COVID crisis the Fed effectively printed 10 trillion dollars. That jacks up the American market and brings it out of crisis very quickly. We also pull out of the crises because if America prints trillions of dollars, the RBI can also do the same, right? And and in fact, the RBI tends to respond with easy monetary policies and therefore we also pull out, but often out of a crisis even the even if the crisis is of America’s making, the Americans pull out quicker than we do. Okay, that’s the difference between India and China India and the US, sorry. China [laughter] was my next question, which is why I said that. I just want to understand what’s the view on China. Is there any exposure there at all? So, so we haven’t invested in China proper, we’ve invested in TSMC, which is in Taiwan. So, question is why haven’t we invested in China proper? There are three things about the Chinese stock market which perturb us, right? First if we look at China’s history even though GDP growth has been stellar, superior to India returns have been inferior to India and America consistently. Like last year. So, so for example, if you take 10 year 10 if you take 10 year CAGRs if you take 10, 20, and 30 year CAGRs, India and America tend to compound returns at anywhere between 10 to 15% in dollars. America does closer to 15, India does closer to 10, but both India and America give you double digit dollar returns consistently. China gives you single digit dollar returns over those decadal cycles, right? So, the question is why given that they have these very attractive levels of GDP growth why do they end up giving single digit returns? And the main reason I want is that they tend the Chinese tend to be in very capital intensive industries and the companies generate very little cash. Because they generate very little cash, for them to sustain growth they keep diluting their shareholders, right? So, that’s the that’s the first aspect in long-term returns India and America stand out vis-a-vis China even though China grows the economy grows its economy far quicker. The second aspect is the Communist Party controls everything in China including stock prices, right? So, an example of this would be what happened to Alibaba and Jack Ma. So, Jack Ma, you know, in a in in his infinite wisdom is wise man, smart man. So, he said a few things, the Communist Party didn’t like it very much. Next thing we know, Mr. Ma wasn’t visible for I think the best part of two years and Alibaba share price took a knock. Now, very difficult for people like us sitting in Mumbai or indeed our team sitting in New York to second-guess that, right? The ins and outs of what’s happening in the Communist Party, unfortunately, we are not privy to, right? The third aspect of China is it’s a very on-off market. Two years of decent returns, two years disappointment. Two years of decent return, two years of disappointment. Combine that with patchy governance standards, we felt that given that we are trying to bring Indians into the global market taking Indians straight into China was a little bit like introducing a child to mathematics by taking them straight into calculus rather than starting with 1 2

Okay. Okay, fair enough. I wanted to get your views as well on this recent Citigroup report. So, it’s outlining a future potentially that’s based on one core thesis that AI [clears throat] is going to get smarter, it’s going to replace a lot of white-collar workers, it’s going to decimate consumer spending, a slew of industries, the stock market is doomed. How are you reading into all of these predictions and where does it fit in when it comes to global diversification? So, 28th March our book will be published on this. So, we’ve been working on this book for 3 years. Effectively, when we started doing the global piece, the penny dropped on us and what was the penny that dropped on us? The penny that dropped on us was AI is at many levels a bigger disruption for the Indian economy than it is for the developed markets, right? So, why is that? So, let’s just step back a little bit. 1750, the first industrial revolution, the steam engine arrives, the power loom arrives and in England spinning and weaving was an artisanal activity. As the power loom arrived, these poor fellows got thrown out of their jobs. For 90 years per capita income went down. It wasn’t until 1850 that the industrial revolution started creating jobs as opposed to eating them up. 1880, the second industrial revolution, electricity arrives in America, Thomas Edison light bulb electricity. 30 years of job losses, right? So, candle makers, gaslight makers, ghoda gadi, the ghoda itself, etc. 1910, gramophone, electricity starts creating Hollywood and jobs arrive. Right? Courtesy of being under colonial rule, those two industrial revolutions passed us by, but this time around it will smack us right in the heart of what’s important for us, right? So, IT services, banking, media, retail, law, these are all important white-collar professions in India employing the roughly 80 lakh graduates that emerge. So, when we started understanding AI 4 years ago, we realized that for the in the Western context AI by and large is a boom. They are population constrained countries, they don’t have too many young people. For them AI is a is a tool which replaces labor with capital. They don’t have that much labor as it is. So, replacing labor with capital in a country like Sweden is heaven. They don’t even have the labor. So, AI doing the work rather than them having to find people is a is a heaven-sent opportunity. For us it’s the other way around, right? We the only thing we have is is 80 lakh graduates a year and as we are already seeing the IT services companies have effectively stopped recruiting, right? If you add up the if you look at the annual reports of the IT listed IT companies over the last 3 years, there’s hardly been any head count adds. I think the similar thing is coming towards financial services, retail, media, and so on. So, for us this will lead to a a pivotal change in our economy. So, our book which will be published on 28th March 2026, Awan, what we are seeing is India now stands at a breakpoint where we will have to break the old pattern of middle-class jobs consumption driven by the middle class on the back of lucrative jobs. We’ll have to break away from that into three fundamental changes. We’ll have to become a country with a far more competitive currency. The rupee has been overly strong boosted by 300 billion dollars of IT exports. The rupee has been strengthened on the back of 300 billion dollars of IT exports. As those IT exports fade the rupee I think becomes far more competitive. I think a rate closer to the dollar closer to 100 to the dollar would make our exporters far more competitive. Second thing is rather than being a consumption driven economy, we will become a manufactured export driven economy. All credit to the government of India, these FTAs that they’re negotiating, I mean the UKFTA, the EUFTA are brilliant deals for India. These will help Indian manufactured exporters find find purchase in the West. And the third piece is we’ll need lower cost of capital and land. If we want to compete in global manufactured exports and we will have to, right? IT exports will not be as much as much of a factor going forward as they’ve been over the last 30 years. As if we want to be competitive, we’ll need cheaper land for factories and lower cost of working capital. So, I think the economy pivots. The next two to three years is that pivot. As India pivots from the economic model that’s been prevalent for the last 30 years to a newer economic model. Okay. And then I want to talk about uh you know, Ruchir Sharma had a recent article and it said bash all day, buy all night. That after US President Donald Trump has come in, there’s so many complaints about the policies, about the reforms, about the tariffs, but yet money is flowing in like never before. Last year foreigners poured in 1.6 trillion dollars into the US financial assets and that was 700 billion dollars into stocks. Why do you think that is? So, part of the thing is to realize that America and India are very similar. These are noisy free market democracies. And whilst the rest of the world loves to cheer and jeer about every announcement in America, and by the way, the same is true for India, um they also realize that these noisy free market democracies are incredibly vibrant, incredibly competitive, right? What’s happening here? You political power is getting contested at every level in America and so in India. Because political power is contested, if you have a thug running these countries at any level of aggregation, local government, state government, national government, this competitive politics, the the incompetent guy will get pushed out. Similarly, in economic life, these are competitive free market economies. So, if a company is inefficient or doesn’t have good products, the free market forces will take care of it. This is in stark contrast to not just China. China is evidently the opposite of everything India and America stands for, but it’s also contrast to most sedate democracies like much of what’s prevalent in say Europe or say Japan, right? There is free market democracies in Japan and Europe, but they’re not as intensely competitive as India and America. And therefore, you and I should take with a pinch of salt all the histrionics that a Donald Trump puts up and do the necessary work to say, hey, if Donald Trump does lots of shouting, is Apple or Microsoft or GE Aerospace um uh really disadvantaged uh if Donald Trump’s and starts a trade war or a looks like he’s going to start a trade war, is his bark worse than his bite? Right? If his bark is worse than his bite, which is I think by and large has been the case on most instances, right? If his bark is worse than his bite, and by the way, I would submit this is also true for of what much of what happens in our country. Our leaders also bark like Mr. Trump barks, but in democracies have to bark, otherwise you won’t be you won’t be listened to. But are these leaders really damaging the economies? Usually not. And therefore, you go through and say, if the underlying companies’ products are attractive, uh fundamentals are strong and valuations are sensible, it’s worth buying. Let me look through the noise and buy. So, Ruchir Sharma is right in saying foreigners have been buying and it’s been a by and large a sensible trade in American equities over the last decade. Essentially, you know, look through the noise and uh You have to, right? You have to look through Otherwise otherwise you won’t do anything. You’ll just stay frozen in your armchair. Okay. So, since we’re not staying frozen in our armchair, uh Saurabh, I I can’t believe I didn’t ask you this earlier, but what percentage of an Indian affluent family’s portfolio typically would you advise being uh with global exposure? The way we’ve thought about it, and we have a multi-asset portfolio team which does this. Yeah. Effectively, you look you’re trying looking to break up your world into three parts, right? A third Indian equities, a third global equities, and a third say precious metals, right? Uh Two caveats to that. I think precious metals being where they are today, maybe this isn’t the best time to to put a third of your wealth in precious metals. I certainly haven’t put a third of my wealth in precious metals as yet. If I was clever, I would have, but hey, I haven’t. And at these valuations, I’m not going to put a third of my wealth in precious metals. Okay. The second aspect is uh for many people listening, uh maybe the thought of putting a third in global equities, they maybe they won’t say and they won’t have the uh the gumption to put a third in global equities uh just yet. And therefore, my suggestion will be if you if you find putting 1/3 of your portfolio in global equities a bridge too far, start with say a number like 1/5. But diversify. Begin your diversification journey. I would say start with a a smaller step. Start with 15, 20%. And then as you build comfort with global equities, as you get to understand uh uh the the mutual fund construct for investing globally through GIFT City, you can go towards the third. But that spread, a third Indian Remember, India is 3% of the global market. So, even if you have 1/3 of your portfolio in India, you’re significantly overweight India. If you’re 1/3 in global equities, global equities are effectively 70% of the market, you’re still underweight Okay. global equities, and a 1/3 in precious metals to give your portfolio uh low correlation with with with a with an asset which tends to give you 7, 8% dollar returns over long periods of time as opposed to say Indian and American equities, which bring you to low low teens returns over long periods of time. Okay. Saurabh, it’s really been enriching understanding this core theme of yours with global diversification. Thank you so much for patiently explaining it all to us. Thanks, Aman. Thank you for hosting me. Lots of key takeaways from this interview. The core decadal theme does keep changing. So, it’s important to try and grasp onto the next one. It was real estate, it was equities, and now it’s global diversification. As lifestyles are changing, as new needs are emerging, as dollar spending has increased within India, global diversification, according to Saurabh, is the need of the hour. looking at investing, MFs in GIFT City are the most tax-efficient opportunity. Start off perhaps with the most easily accessible, which is the S&P 500. Be very careful of tax consequences. The US as a market is more preferred um and smaller countries uh perhaps have a little bit of less less exposure. And in terms of exposure, it would be 1/3 in Indian equities, a third in global, and a third in precious metals. I hope you enjoyed watching the interview. Do remember to like, share, and comment. Thanks for watching. Investment in securities market are subject to market risks. 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