Newsletter : August 2026

Most of us are taught to save money - and rightly so. Setting money aside and spending within our means are the foundations of sound financial planning. Nearly 80% of Indian households prefer protecting capital over pursuing higher, uncertain returns, according to the SEBI Investor Survey 2025 - and the number is almost identical among Gen Z, at 79%. Safety, it turns out, isn't an older generation's habit. It's a near-universal one.

Saving protects money you'll need soon - an emergency fund, a vacation, a down payment. The priority is safety, liquidity, and certainty, not maximizing returns.

Investing grows wealth in real terms for needs years or decades away - retirement, a child's education, long-term wealth. It may fluctuate short-term, but aims to outpace inflation over time.

Trouble begins when investing is treated like saving. The same choice can be safe in the short term and unsafe in the long term. The reason is simple: inflation.

Inflation: The Invisible Risk to Your Wealth

Inflation is the gradual rise in prices, and it steadily erodes purchasing power. Between March 1979 and March 2026, Indian inflation averaged about 6.81% a year. At that rate, Rs. 1 lakh needed to grow to roughly Rs. 22.1 lakh just to maintain the same purchasing power. (Source: RBI, inflation data as on Mar 2026; WPI-based before 2012-13, CPI-based thereafter.)

This is why earning a positive return isn't enough. What matters is a positive real return - one that grows purchasing power, not just the number on the statement. If a fixed deposit earns 7% which is nominal return, while inflation runs at 6%, the real return is only about 1%. Factor in tax, and in some cases the investment may not even keep pace with the cost of living.

What Does History Tell Us?

Here's what Rs. 1,00,000 became over the same 47 years, in nominal terms, across asset classes - and what it was really worth once inflation is factored in:

Investment	Nominal Return	Real Return	Value of Rs. 1,00,000
Savings Account*	4.00%	-2.63%	Rs. 6.3 Lakh
Bank Deposits	8.17%	1.28%	Rs. 40.2 Lakh
Company Deposits	9.17%	2.21%	Rs. 62.0 Lakh
Silver	10.48%	3.43%	Rs. 1.08 Crore
Gold	11.24%	4.15%	Rs. 1.50 Crore
Sensex	15.01%	7.68%	Rs. 7.19 Crore

Source: RBI - Inflation data as on Mar 2026 (Note: Inflation data before 2012-13 is taken as per WPI rate & from 2012-13 CPI rate is considered.) || Source : RBI - Gold & Silver data as on Mar 2026 || Source : RBI - Bank Deposits & Co. Deposits data as on Sep 2025 || Sensex data as on Mar 2026 - Source BSE || *Assumes an average savings account rate of 4% over the period || Past performance may or may not be sustained in future.

Start with the savings account - the instrument most households treat as the safest of all. In nominal terms, Rs. 1,00,000 grew to Rs. 6.3 lakh. The passbook number rose. But the real return was -2.63% a year: Rs. 6.3 lakh today buys less than the original Rs. 1,00,000 could in 1979. The balance grew. The wealth shrank.

Bank deposits, company deposits, and silver did somewhat better - real returns of 1.28%, 2.21%, and 3.43% - but barely nudged past inflation, and deposit returns are pre-tax; post-tax, they turn even weaker. Gold improved further, at 4.15% real. Equity, represented by the Sensex, stands apart: a 7.68% real return turned Rs. 1,00,000 into Rs. 7.19 crore nominal - not incrementally more, but an order of magnitude more, once purchasing power is properly accounted for.

The point isn't that one investment suits every investor or need. It's that long-term wealth building requires returns that consistently outpace inflation - simply preserving capital may not preserve purchasing power.

The Risk You Can't See Is the One That Matters Most

Equity falls, and everyone notices - the number turns red, the headlines arrive. Savings accounts and FDs never do this; the balance only rises, so they feel safe by comparison. But inflation doesn't announce itself. It sends no alert - it simply ensures money sitting quietly in a savings account buys less each year. Equity's risk is loud and short-lived. Inflation's risk is silent and permanent.

So the next time you're tempted to call an investment "safe," check two things: will it protect your purchasing power, and will it fulfill the need it's meant to fund? A savings account passes that test for a need next month. A fixed deposit, for a need a little further out. Equity can outpace inflation over time, but isn't built to be touched on short notice - it earns its place only for needs with a long runway.

History has delivered its verdict: the instruments millions trusted most quietly did the least for them, and the one most feared did the most. The lesson isn't to fear equity less - it's to fear inflation, silently eating away at what "safe" money can buy, a great deal more.

The information contained herein is only for information and does not constitute, and should not be construed as investment advice or a recommendation to buy, sell, or otherwise transact in any security or investment product or an invitation, offer or solicitation to engage in any investment activity. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

Pull out your SIP mandate from ten years ago and your salary slip from this month, and lay them side by side. One of those numbers has grown quietly, year after year. The other hasn't moved at all.

A SIP That Stopped Keeping Up

Nobody sat down and decided to invest less. The bank instruction from ten years ago simply never got revisited, while the number it was once a fifth of kept climbing on its own. Do the arithmetic and the SIP has quietly slipped from 20% of income to around 8%. Had it grown at the same pace as the salary, it would be closer to Rs. 50,000 a month today - not Rs. 20,000.

It isn't only investors who never touch their SIP who fall behind, either. Plenty do revisit it every few years and bump it up - Rs. 20,000 becomes Rs. 25,000, say, and it feels like a real step up. But measured against what the income has actually grown by, a jump of a few thousand rupees is still nowhere close to the Rs.50,000 the numbers call for. The increase happened; it just wasn't sized to the actual growth behind it.

A financial need doesn't really care how the SIP was originally sized. A child's education or a retirement corpus has a cost and a rough date attached to it, set mostly independent of whatever felt reasonable in year one. If the SIP isn't moving while income is, the shortfall between the two builds up steadily, without any single decision along the way that felt like a compromise.

What a Top-Up Actually Does

A SIP Top-Up closes exactly that gap - increasing the instalment by a fixed amount or percentage at set intervals, so the plan keeps pace with what you're actually able to set aside, rather than what you could afford a decade ago.

The Numbers

On a Rs. 10,000 SIP with a Rs. 2,000 annual Top-Up, assuming the 12.62% long-term average AMFI's own guidelines use for equity funds:

	Time to Reach 1 Crore	Corpus at 20.1 Years
Regular SIP of Rs. 10,000/-	20.1 Years	Rs. 1 Crore
SIP of Rs. 10,000/- with Rs. 2000 Top-Up	15.2 Years	Rs. 2.18 Crore

Assuming an average return of 12.62% p.a. as per AMFI Best Practice Guidelines Circular No. 109-A/2024-25, dated September 10, 2024. Past performance may or may not be sustained in future and is not a guarantee of future returns.

Two things follow from that, in practice. Financial needs get met sooner, since more of a rising income is actually reaching them each year instead of the fixed sum agreed to long before. And the corpus ends up larger, since each additional instalment gets whatever runway is left to compound. None of it needs a fresh decision each year - the increase sits inside the plan the same way the original SIP did.

Advantages of a SIP Top-Up

Reach financial needs sooner - a rising instalment shortens the time it takes to hit a fixed target, so the same corpus arrives years earlier than it would on a flat SIP.
Build a higher corpus - over an identical tenure, the extra instalments plus compounding add up to a meaningfully larger final corpus.
Stay systematic - the increase is scheduled and automatic, the same disciplined way the original SIP was set up, with no fresh decision required each year.
Keep pace with rising income - savings grow proportionately as earnings grow, instead of quietly shrinking as a share of what's being earned.

Where This Leaves You

If your income has grown since you started a SIP - and for most people, it has - a fairly simple question follows: has your investment grown with it? Where it hasn't, that's rarely because of anything done wrong, just a plan set once and left alone a little too long. A small increase, added regularly, tends to be enough to close the gap.

The information contained herein is only for information and does not constitute, and should not be construed as investment advice or a recommendation to buy, sell, or otherwise transact in any security or investment product or an invitation, offer or solicitation to engage in any investment activity. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

Every year, when the monsoon arrives in India, it brings relief from the heat - and also a fresh set of risks that most families never plan for. This July, Surat received 358 mm of rainfall in just 24 hours, flooding large parts of the city. Nine people lost their lives in rain-related incidents - some due to electrocution, some by drowning, others when trees fell on them. Over 3,400 people had to be rescued from flooded neighbourhoods.

Tarun, a 34 year software professional, is walking home from office in ankle-deep water, and a live wire from a damaged pole is lying submerged nearby. This is exactly how several of the recent monsoon deaths in Gujarat happened - through electrocution in waterlogged streets. Others are swept away in flash floods or drown while trying to cross a flooded road, not realising how deep or fast the water actually is.

None of these people planned to die that day. They were going about a normal day - going to work or coming home from work. This is the uncomfortable truth about life: it doesn't send a warning before it changes completely.

A Term Life Insurance policy ensures that even in your absence, your spouse can pay for monthly groceries, your children can stay in school, and existing home or car loans won't force your family into debt. It provides guaranteed financial survival when your family needs it most.

Why Health Insurance Is Non-Negotiable in Monsoon

Monsoon isn't just about rain - it's also disease season. According to Mumbai's civic health data for this year, dengue cases rose from 734 to 938, malaria cases climbed from 3,115 to 3,681, leptospirosis cases increased from 136 to 157, and swine flu cases nearly tripled to 113 - all within a matter of months*. These aren't rare illnesses affecting a handful of people; they affect thousands of families every single monsoon, in almost every city.

*source: The NE Times

Hospital bills for even a few days of admission with tests, IV fluids, and medicines can easily run into a lakh or more. Without health insurance, this can wipe out months of savings in one stroke. With it, you focus on recovery, not on how you'll arrange the money.

Health insurance during monsoon isn't just useful - it's essential, because the diseases that spread in this season don't check your bank balance before they strike.

Why Accident Insurance Deserves Its Own Place

Rajesh, a chartered accountant is riding his motorcycle home after work in Mumbai. Due to a heavy shower the road ahead looked flat, but beneath the muddy rainwater lies a deep, hidden pothole. His front tyre drops into the crater, causing the scooter to skid violently. Rajesh breaks his collarbone and knee, requiring surgery and two months of complete bed rest. As a self-employed CA two months off work means two months of zero income.

Monsoon roads are unpredictable. A pothole hidden under muddy water, a manhole cover displaced by the current, a slippery staircase at your building's entrance - these are everyday hazards that suddenly become dangerous when it rains.

A personal accident insurance covers injuries from accidents, including temporary or permanent disability, and provides compensation even if the person survives but can no longer work the way they used to. Imagine a small business owner or a daily-wage worker who breaks a leg after a fall on a flooded road. Health insurance may cover the hospital bill, but who covers the loss of income while they can't work for two months? That's exactly the gap accident insurance fills. It is an incredibly affordable and essential safety net for anyone who commutes daily through chaotic monsoon traffic.

Why Motor Insurance Is Much More Than Just "Mandatory Third Party Cover"

Recently many vehicles submerged in Surat, Mumbai, and other flood-hit cities - many cars parked in basements and open lots. Water entering the engine, electrical systems getting ruined, and interiors getting soaked isn't just inconvenient - it can mean repair bills running into lakhs, or the vehicle being declared a total loss.

Amit parked his car in his office basement in Surat. The relentless rain overwhelmed the city's drainage system, filling the basement with four-five feet of floodwater. By evening, his car was completely submerged.

Many people like Amit carry only third-party motor insurance, thinking it fulfils the legal requirement and that's enough. But third-party cover doesn't pay for damage to your own vehicle. A comprehensive motor policy, especially with an add-on for engine protection, is what actually protects you when your car gets stuck in a flooded underpass or a submerged parking lot - something that has become almost routine during Indian monsoons in cities like Mumbai, Chennai, and Surat.

The Bottom Line: Protecting the Four D's

Term life insurance protects your family from the financial impact of your death.
Health insurance protects you from the cost of disease.
Accident insurance protects you from the financial impact of disablement.
Motor insurance protects your vehicle from damage.

You cannot control the rain, the potholes, the flooded streets, or the diseases that come with the season. But you can control how prepared your family is to face them financially. Monsoon is a reminder, not a one-time event - the risks it brings return every year.

If you haven't reviewed your insurance cover recently, this monsoon is as good a time as any to do it.

Momentum is one of the more awkward ideas in investing. The FIFA World Cup offers a useful way to think about it.

A brief word on factor investing

Before we delve deeper into the momentum factor, let's take a quick look at factor investing. Factor investing studies characteristics that have historically helped explain the behaviour (such as return and drawdowns) of securities (such as stocks). The value factor focuses on price relative to fundamentals. The quality factor studies a company's financial strength. The low volatility factor examines price behaviour during market swings. And finally, the momentum factor studies relative price strength.

Importantly, a factor is useful only if it can be defined in advance, tested over long periods and implemented consistently. Otherwise, it becomes a story attached to a portfolio after the fact.

Momentum factor passes the first test because it can be measured. The usual inputs are price returns over a defined period, such as six or 12 months. More refined models may adjust the signal for volatility or examine earnings momentum. But the common thread is simple: the process ranks stocks by evidence of recent strength.

What is the momentum factor?

The football comparison also helps clarify what momentum is measuring. A serious pundit would not judge a team only by one spectacular goal. They would look at whether the improvement is visible across matches, whether the defence is holding up, whether the midfield is controlling play and whether the performance survives pressure.

Momentum investing requires the same caution because a single sharp price rise is insufficient evidence. A better process looks for persistence over a defined period, adjusts for volatility and checks whether the business has enough quality to support the signal. Recent strength matters only when it survives scrutiny.

Why momentum can work

The common explanation for momentum is circular: prices rise because prices have risen. That is not a satisfactory explanation. It describes the pattern but says little about the cause.

A better answer lies in slow belief revision. That is because investors anchor to old views, analysts gradually raise earnings estimates and institutions build positions over time. The reason this revision process is slow is that many market participants prefer confirmation to early action. So, when facts improve, the market may respond in stages.

However, the same delay can work in reverse. Weak companies may continue to underperform because investors are often reluctant to accept that the original investment thesis is no longer valid. Thus, negative information or bad news may also take considerable time before it is fully reflected in prices.

Momentum is therefore rooted in behaviour as much as in data. The market may be efficient over long periods, but the path to that efficiency can be untidy. The momentum factor attempts to capture that path.

Price strength is a signal, not a verdict

A rising price can mean several things. Sometimes it reflects improving business fundamentals. Sometimes it reflects temporary enthusiasm. And sometimes it may reflect liquidity moving into a narrow part of the market.

A rule-based momentum process must make a clear distinction between these cases. Raw price momentum is a useful starting point because it is clean and observable. But it is also blunt. A stock can rank well on recent performance even when its balance sheet is strained or its earnings quality is poor.

This is the first serious caution in momentum investing. Price strength can identify an opportunity but it can also disguise fragility.

How momentum investing is implemented

A disciplined momentum strategy starts by deciding which stocks to consider. It measures recent strength using set rules, ranks the stocks, builds the portfolio based on those rankings, and rebalances at regular intervals.

How you design the strategy matters. If you look back over too short a period, you might catch random moves. If you look back too long, you might react too slowly. Using just price can find big winners, but it can also lead to unstable stocks being considered. Adjusting for volatility can highlight steadier trends. Checking earnings momentum can show if price moves are backed by real business results.

Given these challenges, a good process recognises that no single signal deserves blind trust. Momentum becomes more credible when price evidence is checked against risk and quality filters.

The main types of momentum

Needless to say, price momentum is the well-known type of momentum in the whole bunch. It ranks stocks by recent price performance.

Risk-adjusted momentum considers how that performance was achieved. A stock that rises steadily may carry a different risk profile from one that rises through violent swings.

Alpha-based momentum tries to isolate stock-specific strength after accounting for market exposure. This can help reduce the chance of mistaking a broad market rally for company-level strength.

Earnings momentum examines the improvement in profits or earnings expectations. It is slower than price momentum, but often more closely tied to business reality.

These distinctions matter because momentum is often discussed as if it were one uniform idea. In practice, construction determines experience. For instance, a strategy based solely on price momentum may concentrate on stocks that have appreciated most rapidly, while a risk-adjusted momentum approach might instead emphasise stocks that have achieved consistent gains with lower volatility. In fact, two strategies may both be labelled as 'momentum,' yet their specific selection criteria and risk profiles can result in markedly different investment outcomes.

Momentum investing in India

India offers a fertile setting for momentum because information is unevenly distributed. Large companies are closely watched. Smaller and mid-sized companies often receive thinner coverage. In those parts of the market, new information may take longer to be reflected in prices.

This does not make the Indian market inefficient in a casual sense. It means the speed of adjustment varies across companies and that variation is exactly what a systematic factor process can study.

According to our own research, the Nifty 500 Momentum 50 TRI has achieved a significant long-term excess return relative to the broader Nifty 500 TRI during the period from April 2005 to March 2026. However, the same research demonstrates that this outperformance came with greater downside risk, as the momentum index experienced more pronounced drawdowns compared to the overall market index.

Momentum leads, at a price

Its higher long-term return comes with the deepest drawdown among the factors shown

Index	Annualised return (%)	Annualised volatility (%)	Sharpe ratio	Maximum drawdown (%)	5Y loss probability (%)	5-year median rolling return (% pa)	10-year median rolling return (% pa)
NIFTY 500 VALUE 50 TRI	16.62	25.56	0.42	-66.06	3.65	14.28	14.75
NIFTY500 MOMENTUM 50 TRI	21.08	22.32	0.61	-70.24	1.66	21.95	20.10
NIFTY500 LOW VOLATILITY 50 TRI	17.22	16.03	0.60	-48.26	0.00	15.83	15.43
NIFTY500 QUALITY 50 TRI	16.26	18.11	0.52	-53.60	0.03	16.77	16.15
NIFTY500 MULTIFACTOR MQVLV 50 TRI	19.43	17.21	0.64	-53.93	0.00	19.24	18.49
Nifty 500 TRI	11.63	19.88	0.28	-63.71	1.11	13.62	13.30

Source: NSE, CMIE, NJ Asset Management Private Limited Internal Research, NJ's Smart Beta Platform (in-house proprietary model of NJAMC). Calculations are for the period April 01, 2005 to March 31, 2026. This data represents a back-tested simulation and does not represent the performance of any existing mutual fund scheme managed by NJ Asset Management Private Limited. Past performance may or may not be sustained in future and is not an indication of future return.

That combination should shape the investor's expectations. While momentum has been powerful in Indian equities, it has also been uncomfortable.

Apart from the market-beating returns, the momentum factor has also seen a remarkable increase in both demand and supply. In March 2020, momentum AUM in Indian mutual funds was effectively zero. However, by March 2026, it had grown to roughly Rs 28,648 crore across 53 schemes.

Source: ICRA, NJ AMC's Internal Research. All Passive and Active Smartbeta Funds are considered. Momentum-oriented refers to those funds that focus on the momentum factor alone as well as combined with other factors. Past data may or may not be sustained in the future.

Three forces have driven this growth:

Improved product availability under SEBI's smart-beta framework.
Rising investor awareness of factor investing as a third option alongside active and passive.
Strong recent performance of momentum in Indian equities, which has pulled capital toward the factor.

The benefit: exposure to persistence

Momentum investing helps investors participate in trends that are already visible but not fully exhausted. This is valuable because markets often reward improving facts before they become universally accepted.

The factor can also behave differently from value, quality, or low volatility. For example, consider an investor holding a portfolio diversified across these factors: if market sentiment shifts rapidly due to new industry data, value stocks might lag as their appeal is recognised only after sustained positive evidence, while momentum stocks could respond swiftly to the new trend. Similarly, during volatile market periods, a low volatility strategy might prioritise incremental and steady gains, whereas a momentum strategy might willingly accept larger short-term fluctuations to capture ongoing trends. These distinctions make momentum potentially useful within a broader factor allocation by providing exposure to return patterns that differ from (and may complement) those of value and low-volatility strategies.

Having said that, no investor should confuse this with a promise. A historically strong factor can underperform for long stretches. Momentum's benefit is the possibility of capturing persistence. But its underlying condition is patience.

The risk: reversals can be brutal

Momentum carries an obvious danger: a trend that persists can also break.

When the turn comes, recent winners may fall quickly and crowded trades can unwind without much mercy. Market leadership can change when interest rates, liquidity or earnings expectations shift. Thus, the same mechanism that attracts capital to winners can push it out just as forcefully.

Moreover, the behavioural risk may be larger than the market risk. A football team that looked fluent in the group stage can look ordinary in a knockout match once the opponent changes the tempo. Similarly, a stock that looked strong in one environment can weaken sharply when liquidity tightens, earnings disappoint or sector leadership shifts.

This is why momentum needs humility. The signal is useful because trends can persist. At the same time, the risk is real because trends can end abruptly.

Investors often discover momentum after a period of strong performance. They enter with fresh confidence and little memory of the last drawdown. When underperformance arrives, the factor feels defective. And exiting at that point converts temporary discomfort into a permanent mistake.

A momentum investor, therefore, needs a more honest question than "has the factor worked?" The useful question is whether the investor can hold it when it stops working for a while.

How rule-based investing deals with momentum

Momentum is too emotionally charged to be handled casually. It rewards strength, which makes it attractive after good periods. Simultaneously, it suffers reversals, which makes it hard to hold during bad periods. So it is easy to see why a discretionary response to such a factor can easily become a buy-high, sell-low habit.

Enter rule-based investing.

A rule-based process is a pre-commitment. The rules decide the universe, the measurement period, the ranking method, the filters and the rebalance schedule before market emotion intervenes. Once set, the process does not change because a recent winner has become popular or a recent loser has become embarrassing.

This is where NJ Mutual Fund's investment philosophy becomes relevant. NJ Mutual Fund follows a 100% rule-based approach. In a momentum fund, that matters because price strength alone is insufficient. The process must also control for companies whose momentum is unsupported by financial quality or governance comfort.

Quality filtration changes the character of the fund. It seeks to remove low-quality companies before momentum selection begins. That does not eliminate risk, but it does reduce the chance that a portfolio owns stocks whose only merit is recent price movement.

This is precisely how our NJ Momentum Fund* works. We call it Quality ke saath Momentum.

Who should consider momentum investing?

Momentum investing suits investors who can accept equity volatility and remain invested through periods of underperformance. A long investment horizon, typically five years or more, is essential. The factor's return pattern can be lumpy and the difficult years are part of the experience.

It is less suitable for investors who need stability, have a short investment horizon or are likely to exit after a sharp fall. It is also unsuitable for investors drawn to the factor mainly because recent returns look attractive.

Suitability matters because we believe momentum does not usually fail investors through complexity. Rather, it fails them through their own behaviour.

Conclusion

Momentum investing begins with a simple observation: markets often recognise change gradually. That observation has produced a well-documented factor.

But don't let that simplicity fool you. A rising stock is not automatically a good investment, and a strong factor record is not automatically a good investor experience. This is where our 100% rule-based process makes hay because the factor itself invites poor behaviour.

The sensible case for momentum investing is therefore not excitement about recent winners. It is the use of a disciplined process to study persistence, exclude weak candidates and rebalance without emotion.

FAQs

Q) What is the momentum factor?
The momentum factor is a measurable characteristic that ranks securities by recent price or earnings strength. It is one of the commonly studied factors in equity investing.

Q) What are the main types of momentum?
The main types include price momentum, risk-adjusted momentum, alpha-based momentum and earnings momentum. Each measures strength differently.

Q) What are the risks of momentum investing?
The main risks include sharp reversals, high volatility, underperformance during market turns and the possibility of entering after a strong run. Investor behaviour is a major risk.

Q) How does rule-based investing help in momentum strategies?
Rule-based investing defines the process in advance. It helps measure signals consistently, apply filters systematically and rebalance without emotional intervention.

*NJ Momentum Fund is an open-ended equity scheme following the momentum theme. Its New Fund Offer opened on July 10, 2026 and closed on July 24, 2026. The Scheme opens for subscription on August 3, 2026. As the Scheme is newly launched and has not completed six months from its date of allotment/inception, it does not have a performance track record eligible for disclosure. Accordingly, returns for the Regular Plan and Direct Plan over the 1-year, 3-year, 5-year and since-inception periods, along with the corresponding value of a Rs. 10,000 investment, are not available and have not been disclosed. Any performance figures appearing in this article relate solely to the stated market indices, factor indices or back-tested research and do not represent the actual or indicative performance of NJ Momentum Fund.

SEBI Registered Name (Number): NJ Mutual Fund (MF/076/21/02) | Details of Other Regulatory Registrations: https://shorturl.at/SEBua

Investors are requested to take advice from their financial/ tax advisor before making an investment decision.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

Janakiraman Rengaraju is vice president and portfolio manager for Templeton Global Investments.

Please note we have published the answers as it is received from the Fund Manager of Franklin Templeton Mutual Fund.

Q : With markets recovering despite a mixed global macro environment, do you believe the worst of the recent headwinds is behind us? What indicators would you watch to distinguish a durable trend change from a temporary relief rally?

Answer : The immediate pressure on markets appears to have eased, though it may be premature to conclude that all headwinds are behind us. Moderating tensions in West Asia and Brent crude returning closer to pre-conflict levels have reduced near-term risks to inflation, the currency and India’s external position.

Valuations have also become more reasonable. MSCI India’s premium to MSCI Emerging Markets narrowed to 75%, from 119% in 2025 and 164% in 2024. On a price-to-book basis, the premium declined from 164% in August 2024 to around 37%, below its 10-year average of 93%.

However, valuations alone cannot sustain a recovery. India’s earnings are closely linked to domestic growth, making broad-based profit growth and actual earnings delivery critical. The weak start to the monsoon also warrants monitoring, although healthy reservoir levels offer some cushion.

Earnings: Profit growth should broaden across sectors and earnings revisions should stabilise. Consensus currently indicates an earnings trajectory of ~ 12% to 14% CAGR over FY27–FY28.
Domestic demand: Credit growth, automobile sales, power consumption, cement volumes, rural wages and private capital expenditure should remain resilient.
Macro stability: Crude oil, inflation, the monsoon and the rupee will influence consumption, corporate margins and investor confidence.
Market breadth and flows: Domestic institutions invested USD 8.7 billion in June 2026, offsetting FPI outflows of USD 3 billion. With global investors still underweight India, stronger earnings visibility and lower currency volatility could support a gradual return of foreign flows.

Overall, while macro risks have not fully receded, the combination of more reasonable valuations, gradual earnings recovery and sector-specific opportunities suggests a healthier medium-term outlook for Indian equities.

Q : Investors often focus on buying good businesses, but even great companies can become poor investments if purchased at excessive valuations. How do you strike the balance between business quality and price while making investment decisions?

Answer : Quality and valuation are two parts of the same investment decision. A strong company can still produce a weak investment outcome if its market price already assumes near-perfect execution.

We assess quality through the company's growth runway, competitive position, earnings visibility, governance, management capability, cash-flow generation and return on capital. We also examine whether the business can sustain its advantages and adapt to changes in technology, regulation and competition.

We then estimate intrinsic value using methods appropriate to the business and test the assumptions under base, upside and downside scenarios. A durable and predictable company may justify a higher valuation than a cyclical business, but quality does not justify an unlimited price. Equally, a low valuation is not attractive if governance is weak, capital allocation is poor or the business is structurally deteriorating.

The objective is to invest in businesses capable of compounding value over time, but only at a price that provides a reasonable margin of safety. This may require waiting for a better entry point or reducing exposure when valuation moves materially ahead of fundamentals.

Q : Investors and even distributors often judge funds and markets on point-to-point returns, which can look dramatically different depending on the start and end date chosen. Why do rolling returns offer a fairer picture of both fund performance and the equity investing experience, and how should investors use them to set realistic expectations?

Answer : Point-to-point returns capture only one investment period and can be significantly influenced by the dates selected. Rolling returns offer a more balanced assessment by measuring performance across multiple entry points and market cycles. For example, five-year rolling returns evaluate every available five-year holding period rather than a single start and end date.

This helps investors assess return consistency, the range of outcomes, downside experience and performance relative to the appropriate benchmark. For long-term equity funds, five-year or longer rolling periods are generally more meaningful.

Investors should focus on the median return, dispersion of outcomes and benchmark-relative consistency rather than the best historical result. Rolling returns cannot predict future performance, but they provide a more realistic basis for viewing equity returns as a range of possible outcomes rather than a fixed or assured number.

Q : Wealth in equities is often attributed to picking the right fund or timing the right entry, yet history suggests the holding period matters far more than either. From your experience across market cycles, what truly separates investors who compound wealth over 15-20 years from those who don't?

Answer : The main difference is generally not the ability to forecast market turning points, but the discipline to follow a suitable investment plan across multiple market cycles. This means starting early, investing consistently, increasing contributions as income grows and remaining committed during market corrections.

Equally important is maintaining an asset allocation aligned with one's need, risk appetite, liquidity needs and investment horizon. For needs more than five years away, diversified equity categories such as flexi-cap and multi-cap funds can provide exposure across market capitalisations and sectors, while the SIP route can help investors use market volatility to accumulate more units at lower prices.

Starting early is equally important. To target Rs. 5 crore by age 60, assuming a 12% annualised return, an investor beginning at age 30 would need to invest approximately Rs. 14,165 per month. Delaying the start by five years would increase the required monthly investment to around Rs. 26,350.

Fund selection and entry valuation still matter, but long-term wealth building is often shaped more by time, rising contributions and the ability to avoid emotionally driven exits. The greatest advantage is not one perfectly timed decision but allowing a disciplined investment plan sufficient time to compound.

Q : Every fund manager follows a distinct investment style, and every style goes through phases of being out of favour. Assume if your scheme is currently underperforming, what would be your advice to investors? How should they decide whether to remain patient or consider switching?

Answer : Underperformance should be reviewed, but recent returns alone should not drive an exit. Investors should first determine whether the weakness reflects a temporary phase for the fund's investment style or a more fundamental concern.

Patience may be appropriate if the fund remains true to its mandate, the investment team and process are stable, portfolio holdings continue to be supported by fundamentals, and the risk profile remains consistent with the stated strategy. For instance, a quality- or valuation-oriented fund may temporarily lag when markets favour momentum or highly valued themes.

The assessment period should also match the fund's investment horizon. A few quarters may be insufficient to judge a long-term equity strategy. Performance should be evaluated against the appropriate benchmark and comparable peers, preferably across a broader market cycle.

A switch may be considered if there is persistent style drift, a material change in the investment team or process, deterioration in portfolio quality, unexplained risk-taking, deviation from the scheme mandate, or sustained underperformance that cannot be reasonably linked to the fund's stated style.

The key is to distinguish between temporary underperformance within a credible investment process and evidence that the original reason for investing in the fund has weakened.

Q : SEBI data shows the vast majority of retail F&O traders lose money, yet derivatives volumes keep rising while the same investors hesitate to commit to long-term SIPs. What explains this paradox, and how can the discipline of investing be made as compelling as the excitement of trading?

Answer : The paradox is largely behavioural. Derivatives offer instant feedback, frequent opportunities and large market exposure for a relatively small upfront amount. This combination can make trading feel more rewarding than the gradual progress of long-term investing, even when the probability of success is low. SEBI's study found that 93% of individual equity F&O traders incurred losses between FY22 and FY24, with aggregate losses exceeding Rs. 1.8 lakh crore.

Trading activity has nevertheless continued to expand. In 1QFY27, the average daily number of options contracts on BSE increased 91% year-on-year to 156 million, while MCX recorded a 248% rise to 13.8 million contracts. Easier access, leverage, overconfidence and the urge to recover earlier losses can keep participation elevated despite poor aggregate outcomes.

The SIP journey presents a more constructive picture. Aggregate SIP flows grew approximately sevenfold at a 26% CAGR between FY17 and FY26. As of May 2026, total SIP accounts stood at 10.47 crore, up 15.6% year-on-year, while SIP assets increased 17% to Rs. 17.12 lakh crore.

The industry also registered 54.16 lakh new SIPs during May, although registrations were 8% lower year-on-year. Importantly, the share of SIP assets held for more than five years increased to 31% in March 2026 from 30% a year earlier, indicating a gradual improvement in holding behaviour. Monthly SIP contributions subsequently reached Rs. 31,781 crore in June 2026.

To make investing more compelling, its progress must be made visible. Linking SIPs to specific needs, tracking milestones, automating contributions and periodically increasing the investment amount can provide a stronger sense of achievement.

Investing need not replicate the excitement of trading. Its appeal should come from turning regular contributions into measurable progress towards long-term financial needs.

Source: Internal Research

Mutual fund investments are subject to market risks, read all scheme-related documents carefully.