Newsletter : February 2026

The Budget That Actually Matters (And It's Not the One from Delhi)

Every February, the nation pauses. Screens light up. Headlines flash. What will the Union Budget bring this year-new tax slabs, higher deductions, a little extra money in hand?

The answer lies in our deep-rooted preference for safety. Nearly 8 out of 10 Indian households prioritise capital preservation over growth. As a result, traditional instruments like fixed deposits, insurance, and gold continue to dominate household savings.

While safety offers comfort, completely avoiding market-linked investments comes at a cost-missed opportunities for long-term wealth building.

What's more surprising is that this mindset cuts across generations. Even Gen Z, often seen as digitally savvy and progressive, displays a similar conservative approach. This suggests that risk aversion is not just a personal choice, but a cultural habit, passed down through families and reinforced by conventional financial wisdom.

Source : SEBI Investor Survey 2025

Why This Mindset Needs to Change-Now

Protecting capital is sensible. But overprotecting it can be dangerous, especially in an inflation-driven economy.

The Inflation Reality: If inflation historically averages 6% and you assume your fixed deposit earns 7%, your real return is barely 1% before tax. After tax, it may turn negative-meaning your money is quietly losing purchasing power.

The Rising Cost of Life:

Education costs are rising at an alarming rate, far ahead of fixed-income returns.
Healthcare expenses in India are projected to rise at 13% in 2025, higher than the global average of 10% as per Aon's Global Medical Trend Rates Report 2025. The increase in healthcare cost is driven by rising hospitalisation rates and the growing adoption of advanced medical treatments.

In such an environment, relying solely on "safe" instruments may keep your money intact-but your future needs are at risk.

The Real Impact on Wealth Building

The difference between playing it safe and taking calculated risk becomes dramatic over time.

Consider a scenario where an investor invested Rs. 10,000 per month consistently over a 25-year period:

Investment Type	Average Return	Final Corpus (Approx.)
Fixed Deposit	7%	Rs. 79 Lakhs
Equity Mutual Funds	12.62%	Rs. 1.88 Crore

*Assuming investment in Equity Fund and an average return of 12.62% p.a. as per AMFI Best Practices Guidelines Circular No.135/BP/109-A/2024-25 dated September 10, 2024. "Past performance may or may not be sustained in future and is not a guarantee of any future returns". FD - Returns are Assumed

That's a difference of over Rs. 1 crore-the reward for disciplined exposure to equities. This gap often defines the difference between a comfortable retirement and a financially constrained one.

How to Build Equity Exposure-Without Losing Sleep?

You don't need to jump in headfirst. Smart investing is about gradual, planned exposure.

Start small with SIPs: Begin with Rs. 1,000–2,000 per month to experience market movements without stress.
Follow the 80–20 approach: Start with 80% debt and 20% equity, and gradually increase equity as confidence grows.
Align investments with Needs: Use equity for needs which are 7–10 years away; stick to debt for short-term needs.
Consider hybrid funds: Balanced Advantage or Aggressive Hybrid funds automatically manage equity-debt allocation.
Secure your base: Maintain an emergency fund covering 6–12 months of expenses before increasing equity exposure.

Start with MFD: DIY Can Hurt

The SEBI survey highlights lack of knowledge as one of the biggest barriers to investing. Yet, many first-time investors rely solely on YouTube videos or social media tips, leading to common mistakes-chasing hot sectors, timing the market, or panic-selling during volatility.

Seek guidance from Mutual Fund Distributors for:

Need identification
Assessing individual risk profiles
Maintaining discipline during market ups and downs
Rebalancing MF portfolios and managing taxes
Aligning investments with your needs

Always verify credentials-look for a valid ARN for distributors.

The Way Forward

The survey reveals an encouraging insight: 22% of non-investors plan to start investing within the next year. If you are among the 80% focused solely on capital preservation, it's worth asking:

Are you preserving your capital-or preserving your limitations?

True financial security in today's world isn't about avoiding risk altogether. It's about managing risk intelligently to beat inflation and achieve your long-term needs.

The real question isn't whether you can afford to invest in equities. It's whether you can afford not to.

Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully before investing. Past performance may or may not be sustained in future and is not a guarantee of any future returns.

Things to Do When Renewing Your Health Insurance Policy

Health insurance is one of the most important financial safety nets for you and your family. While buying a health insurance policy is a crucial step, renewing it thoughtfully is equally important. Many policyholders treat renewal as a routine payment exercise, but this is actually the best time to review, upgrade, and optimize your coverage.

The World is Investing in Quality Factor. Have You?

Introduction
Imagine planning your financial future like a long road trip. You can choose the scenic, adventurous, but unpredictable route, which is full of sharp turns, sudden stops, and frequent surprises, or take the smooth expressway built to endure all seasons. As an investor, this is the confusion you face every day: Should you chase short-term performance or stay invested with quality factor investments, which are designed to create wealth over the long term?

What Is the Quality Factor?

In factor investing, the quality factor refers to a systematic way of identifying companies with a strong balance sheet, high and consistent ROE, high and consistent dividend payout, and low debt, along with strong governance. While other factors, such as momentum or value, capture different traits of market behavior, quality focuses on resilience and sustainability, which possess fantastic characteristics, particularly valuable in uncertain times, and create wealth over a period of time.

USA Context: Quality Gaining Ground in Developed Markets

Let's take a quick look at the data from the US smart beta market, now valued at over $2.8 trillion in AUM (as of Dec 2025).

Factor	Factor-wise Growth over the Last Decade
	Number of Factor-Based ETFs			Equity Smart Beta AUM
	No. of factor-based ETFs in 2015	No. of factor-based ETFs in 2025	Growth	AUM as of 31st December 2015 (In US$ million)	AUM as of 31st December 2025 (In US$ million)	AUM Growth
Quality	12	62	17.85%	5,586.13	142,413.52	38.24%
Value	48	125	10.04%	98,957.10	656,584.10	20.83%
Momentum	26	35	3.02%	5,905.24	56,159.81	25.26%
Low Volatility	29	52	6.01%	24,528.04	62,024.42	9.72%
Size	57	60	0.51%	32,247.20	166,436.34	17.84%
Growth	35	103	11.40%	114,497.92	807,142.98	21.57%
Multi-factor	118	189	4.82%	41,872.17	286,504.35	21.21%
Others	115	400	13.28%	129,060.11	667,415.93	17.86%
Total	440	1026	8.84%	452,653.90	2,844,681.46	20.18%

Source: Bloomberg Intelligence

The number of Quality ETFs grew from just 12 in 2015 to 62 in 2025, a 17.85% rise, outpacing most other factors.
More impressively, the AUM in Quality ETFs surged from $5.59 billion to $142.41 billion, reflecting a massive 38.24% growth, which is the highest among all listed factors.

This indicates that investors are increasingly prioritizing quality as a core long-term strategy, thanks to its proven resilience and strong performance.

Once seen as a niche lane on the investment highway, quality investing has now become the main route for many long-term investors. In 2015, there were only 12 Quality ETFs in the U.S. However, by 2025, that number had grown to 62, which provides a clear signal that more travelers are choosing the road built for endurance.

And it's not just about more vehicles on the adventurous route; it's about the strength of a smooth journey itself, which provides a comfortable experience.

AUM grew from USD 5.59 billion in 2015 to USD 142.41 billion in 2025.
The acceleration after COVID marks a turning point for the quality factor in the US, a shift in how investors choose their path: with more focus on resilience, reliability, and long-term direction.

Source: NJ AMC's Internal Research, Bloomberg Intelligence. Data for each year from 2015 to 2025 are as of 31st December. Past data may or may not be sustained in the future.

The Indian Context: Quality Awakening at Home

India hasn't lagged behind this movement. Take a look at how quality-focused rule-based investment vehicles have evolved over the past few years:

In 2019, India had only one quality-oriented ETF with AUM of roughly Rs. 18 crore.
By 2025, that number surged to 32 quality ETFs with a combined AUM of Rs. 4,956 crore and growing.

Long-term performance supports this adoption:
Since 2005, quality strategies have delivered around 19% annualised returns, significantly outpacing broad-market averages.

Growth of Rule-Based Quality Funds in India

Source:ICRA, NJ AMC's Internal Research. Data for each year from 2019 to 2025 is as of 31st December. Quality-oriented funds refer to those funds that focus on the quality factor alone, as well as combined with other factors. Past data may or may not be sustained in the future.

This demonstrates not just short-term demand but a lasting structural shift in investor preferences for a smooth financial journey of long-term wealth creation.

A Real Example: What Quality Looks Like in Action

To understand the real power of quality, consider this data comparison between three portfolios: a High Quality Model, a Low Quality Model, and the Nifty 500 TRI.

High Quality Model, Low Quality Model vs Nifty 500 TRI

Source:NJ AMC's Internal Research, CMIE, NSE, NJ AMC's ProprietarySmartBeta Research Platform. Data is for the period 30th September, 2006 to 30th November, 2025. High Quality Model is represented by NJ Quality+ Model. NJ Quality+ Model and Low Quality Model are proprietary methodologies developed by NJ Asset Management Private Limited The methodology wil keep evolving with new insight based on the ongoing research and will be updated accordingly from time to tima 5Y Probability of Loss (9%) reprasents the percentage of negative retum observations across all 5-year rolling retum periods, where returns are calculated on a daily rolling basis. Past performance may or maynot be sustained in future and is not an Indication of future return.

As per the past data:

The High Quality Model delivered the highest returns (18.99% CAGR), with lower volatility than both the Low Quality and the Nifty 500 index.
Most importantly, it had a zero probability of loss over 5 years, underscoring its long-term strength and resilience.
In comparison with the High Quality Model, the Low Quality Model not only delivered the lowest returns (8.96%) but also had the highest volatility and risk of loss (16.77% over 5 years).

This reinforces the core message of quality investing: you don't need to sacrifice returns for stability. In fact, high-quality portfolios offer a dual advantage: superior performance and lower emotional stress over time due to uncertain market movements.

Why Quality Factor Investing Is Gaining Investor Confidence

Many forces are driving the shift toward quality:

Market volatility is the new normal: Geopolitical tensions, economic slowdowns, and rapid policy shifts have made markets more unpredictable. In such kind of environments, quality stocks often display lower drawdowns and faster recoveries.
Investor awareness is rising: This is due to the easy access to research and factor data; investors are becoming increasingly aware of the long-term benefits of quality-oriented strategies over short-term speculation.
Technological advancements in investing platforms: Algorithmic and smart beta portfolios now often include quality filters as a core component, making it easier for investors to adopt these strategies.
Institutional adoption: Pension funds, insurance companies, endowments, and sovereign wealth funds, along with traditionally conservative allocator,s are embedding quality factors into their portfolios to better manage risk and long-term liabilities.

Conclusion

If you're tired of the ups and downs of the market, quality investing offers a steadier path; one that's built for long-term success, not short-term thrills. This shift isn't about chasing the next big thing. It's about focusing on what truly lasts, because when it comes to building wealth, it's not about being fast, but it's about staying invested.

For anyone thinking of staying invested over the years to come and not just for the short term to build wealth, the quality factor is a smart and reliable way to invest for the future.

FAQs

1) How does quality differ from other factors like momentum or value?
Quality focuses on financial strength and performance consistency, whereas momentum tracks recent price trends, and value looks at relative cheapness.

2) Can quality investing reduce emotional investing mistakes?
Yes, because it encourages long-term holding and minimises reactive trading during market stress.

3) Does quality outperform in all market conditions?
Quality doesn't outperform in every brief market phase. It typically delivers more consistent and stable returns with lesser volatility across market cycles over a long period of time.

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.

Fund Manager Interview

Mr. Rahul Singh

Chief Investment Officer (CIO) - Equity, TATA Mutual Fund

With over 27 years of investment experience, Mr. Rahul Singh joined Tata Asset Management in October 2018 as CIO-Equities, leading the fund management and equity research teams.

In his previous role at Ampersand Capital Investment Advisors LLP, Mr. Rahul was the Managing Partner. He has also worked with many reputed financial institutions like Standard Chartered Securities and Citigroup Global Markets India as Head of Equity Research.

Mr. Rahul is a Bachelor of Technology in Mechanical Engineering from IIT Bombay and an alumnus of IIM Lucknow where he pursued his Master of Business Administration in Finance and Financial Management Services.

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

Q : India is currently witnessing multiple shifts-AI disruption, the rise of new-age companies, an active IPO pipeline, and changing investor behaviour. How do you see these forces shaping Indian equity markets over the next few years?

Answer : Increased AI adoption and data-center building could extend India's capex cycle (power, transmission, renewables, capital goods), while new-age listings broaden market depth and shift leadership beyond a narrow mega-cap core. Structurally, India's drivers remain intact, investment, credit, real estate, and manufacturing tailwinds, with valuations supported by a still-healthy earnings outlook into FY26. Persistent domestic flows (SIP/DIIs) could help cushion global volatility, keeping India's growth premium versus Emerging Markets (Ems), though this premium has eased in recent times.

Q : Amid GST reforms, global trade negotiations, and structural changes, which sectors look most attractive to you at this stage?

Answer : Near term beneficiaries from GST 2.0 include FMCG/Staples, small autos & consumer durables, Insurance/Banks (consumption-led credit, insurance at nil GST), Cement/Materials (lower input taxes), and Diagnostics & Hospitals (healthcare spend uplift). Core cyclical exposure remains in Power (demand + grid capex), Select Capital Goods/Manufacturing, and Oil & Gas (where valuations are reasonable). We stay disciplined on valuation in expensive pockets of Industrials/Cap Goods; stock selection and margin trajectories are key.

Q : Domestic SIP flows have been remarkably consistent. Do you see them providing a strong floor to Indian equities even if FIIs turn sellers?

Answer : Yes, to a meaningful extent. SIP inflows were Rs. 28,265 cr in August 2025, near peak run rates, even as market breadth softened. Within DIIs, CYTD equity net buying is US$59.3 bn, versus FII outflows US$14.4 bn (Data Source: AMFI Aug'25), indicating domestic savings are still absorbing global risk-off phases. The "floor" isn't absolute, shocks can raise drawdowns, but the structural strength provided by SIPs/DIIs has clearly reduced downside beta versus past cycles.

Q : Many investors found the Q1 earnings season below expectations as signs of broad-based growth were missing. Do you think earnings recovery will come in Q2 or Q3 onwards?

Answer : Yes, we expect earnings to gradually improve from Q2 onwards. The recovery should be led by banks (as margins stabilize), power companies (benefiting from strong demand and capex), cement and Oil & Gas (helped by cost trends), and some tech firms. Overall Nifty earnings growth are expected to be decent in FY26. The recovery may not be broad based right away, but we see signs of improvement becoming clearer in the next couple of quarters.

Q : Fed Chair Jerome Powell has hinted at a possible rate cut next month, which has already lifted sentiment across Asian markets. How meaningful could this development be for India, particularly in terms of foreign fund inflows?

Answer : A 25 bps cut is widely expected, markets are already pricing in easier policy heading into year end. A softer stance by Fed typically pressures DXY lower and reduces global real-rate headwinds, which is a positive for Emerging Market (EM) FX and flows, India included. It is further likely to anchor oil near the mid 60s unless geopolitics flares up. Near term, flows are still likely to toggle on tariff headlines, but the rates backdrop is a net positive for India's risk premia.

Q : Many investors tend to chase short-term performance and themes. What advice would you give to retail investors looking to build wealth sustainably?

Answer : Stick to a disciplined Core & Satellite strategy: Core large-cap exposure (better risk-reward at current relative valuations) with selective Small & Mid Caps and thematic sleeves where earnings durability is clear. Use SIPs to average cycles, avoid extrapolating hot narratives at stretched multiples (notably where mid/small-cap premiums remain above long-term levels). Focus on GARP and valuation discipline.

Note: Views provided above are based on information in the public domain and subject to change. Investors are requested to consult their mutual fund distributor for any investment decisions.

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

Prabhat Tripathi (ARN-160073)
AMFI REGISTERED MUTUAL FUND DISTRIBUTOR

Prabhat Tripathi

9839066988

contact@investwithprabhat.com

www.investwithprabhat.com

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"We have taken due care and caution in compilation of this E Newsletter. The information has been obtained from various reliable sources. However it does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions of the results obtained from the use of such information. Investors should seek proper financial advise regarding the appropriateness of investing in any of the schemes stated, discussed or recommended in this newsletter and should realise that the statements regarding future prospects December or December not realise. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. Past performance is for indicative purpose only and is not necessarily a guide to the future performance."

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