MC EXCLUSIVE The End of Uncertainty Changes Everything: Ritesh Jain on Why Foreign Money Could Return to India

With trade uncertainty easing, the rupee should stabilise.

• India–US trade deal may boost foreign investor sentiment and inflows
• Rupee expected to stabilize near 90 per dollar, making assets more attractive
• Export sectors likely to see early revival; bond inflows remain uncertain

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With Indian markets struggling to attract foreign capital over the past year and sentiment bruised by tariff uncertainty, currency volatility and weak foreign flows, investors are keenly watching for signs of a turning point. In an exclusive conversation, Ritesh Jain, founder of US-based Pinetree Macro shares his views on whether the India–US trade breakthrough can revive foreign inflows, where the rupee is headed, which sectors could see renewed buying interest, and what lies ahead for bond markets and yields.

Q: Will this US Trade deal bring foreign investors back to India?

A: There was a lot of pessimism around Indian equities over the past year. India did not participate meaningfully in the global rally, and foreign money steadily moved out of domestic markets. Some portion of that capital can now return. A large part of this is about perception. Sentiment had turned deeply negative. That began improving after the EU deal itself, but the US remains India’s largest foreign investor. Markets dislike uncertainty, and the removal of this uncertainty provides a much-needed sentiment boost.

It also matters that India has secured this deal largely on its own terms. I am quite confident that the government has not compromised on sensitive areas such as agricultural imports. For NRIs as well, Indian assets now look attractive — equities are cheaper, and the rupee is weaker — which could encourage overseas Indians to step back in and accumulate assets.

Q: Where does the rupee settle now?

A: The currency had clearly gone out of hand. That constrained fiscal flexibility and limited the scope for rate cuts, as bond markets were already under stress. With trade uncertainty easing, the rupee should stabilise. Having said that, this phase of depreciation was not entirely negative. We do not need to return to levels like 85 to the dollar. Current levels are reasonable. The new fulcrum for the rupee is closer to 90, not 85. The currency had to adjust given global conditions, and at these levels, foreign investors will find Indian assets more attractive on a valuation basis.

Q: Which segments could see buying in the equity markets?

A: Export-facing sectors are likely to see the earliest revival. Many of these stocks — especially in the mid- and small-cap space — had been falling relentlessly, almost like a bottomless pit. With tariff uncertainty easing, we should see some pullback and stability returning to these segments.

An important point is that on the domestic side, a lot of money had moved into gold and silver because they were the only assets delivering returns while equities struggled. The recent correction in precious metals may have unsettled some investors. As equity momentum improves, it is quite likely that some of that money will rotate back into stocks.

Q: What about foreign investment into bonds?

A: That is less certain. Globally, money is moving out of bond markets. Governments across countries are targeting high nominal GDP growth and expanding debt levels. Large pools of capital are not aggressively chasing fixed income right now. While some inflows may come into Indian bonds, they are unlikely to be meaningful in the near term.

Q: Where are bond yields headed?

A: Government supply of bonds remains large, and the RBI may need to step in with more aggressive open market operations (OMOs) to contain yields at current levels. Earlier, the central bank was cautious because injecting liquidity through OMOs could weaken the currency further.

Now, with the rupee stabilising, that constraint eases. If the currency holds steady, yields should not rise sharply. However, there is one key risk — oil prices. If crude rises meaningfully, inflationary pressures could spill into the domestic economy, complicating both monetary policy and bond market dynamics.