• Global reset: Munot said the long-running “Goldilocks” environment—supported by government stimulus, low rates, corporate cash, household spending and China exporting deflation—is giving way to fiscal pressures and hawkish central banks. He pointed to market paradoxes: gold, silver and Bitcoin were down while the Dollar Index was up, despite heavy US borrowing, and AI investment was drawing capital from equity and debt markets.
• India and outflows: Domestic growth indicators, including auto sales and credit growth, looked good, companies were not broadly reporting weak demand, and the 8th Pay Commission and other measures could support demand next year. But AI-related borrowing was $20 billion year before last, a little over $100 billion last year, more than $200 billion this year and projected to be higher next year, contributing to a disconnect between the economy and market behavior.
• Tax predictability: Global investors want taxation to be simple, transparent and predictable. India represents 3-4% of global GDP but has less than 1% of global capital invested in it, and incremental FDI and FPI flows over the last couple of years have not been positive; Munot said the government’s stated willingness to review taxes could help, including a relook at fixed-income taxation that has reduced long-term bond allocations.
• Long-term capital: Munot said India is capital deficient and needs more structural, long-term money through both FDI and FPI, alongside domestic savings channelled through mutual funds. He said a few basis points of STT would make little difference to long-term equity investors compared with growth, predictability and a reasonable tax structure.
• RBI and currency: The RBI’s measures included encouraging FCNR flows, with over $140 billion, and steps to curb speculative trading, including measures in the derivatives market. Munot said encouraging FPI flows could ease currency pressure; higher oil prices weigh on the macro outlook, while softer oil after the November elections would help.