Praveen Jagwani Advises Capital Preservation for Portfolio

Praveen Jagwani, CEO of UTI International, advises investors to prioritize portfolio resilience 2026 by focusing on capital preservation over returns for the coming 6-12 months. He warns that rising global yields, a stronger dollar, and pressure on currencies like the rupee demand a defensive shift from return-seeking strategies.

Rising US fiscal deficits, AI-driven spending, and the limits of monetary policy are amplifying vulnerability to shocks, especially for leveraged and concentrated bets. The US fiscal deficit is described as unsustainable while the underlying economy is structurally weak. Much of current US economic momentum is propped up by AI-related capital expenditure. Traditional monetary policy is said to lose its edge under fiscal dominance. The Fed primarily influences the short end of the yield curve, while longer-term rates depend on global demand for US Treasuries. A token 25-basis-point Fed hike would do little to alter the domestic US landscape. Higher borrowing costs would strain an already vulnerable US consumer base. The global transmission channel of interest rates remains highly potent.

Currency pressures and yield spikes threaten emerging markets

Higher global yields, a stronger dollar, and rupee pressure create headwinds for emerging market assets, with the US 10-year yield at 5% acting as a key transmission channel. Central banks in Japan, the Eurozone, and the UK are pushing rates higher. The RBI faces pressure to follow suit to maintain capital equilibrium. The US Dollar retains its status as the world’s dominant reserve and trade currency. Even with long-term structural debasement, the US dollar’s immediate path triggers sharp volatility in emerging market asset classes.

Jagwani prescribes maximum diversification as the core defence

To withstand global turbulence, investors should reduce leverage and spread holdings across quality equities, high-grade debt, precious metals, and real estate. Jagwani believes global risks are increasingly stacked against speculators. Maximum diversification is presented as a key defence against global market shocks. Resilience does not require broad reduction in equity exposure but greater selectivity and realistic return expectations. Valuation dispersion is significant, especially across mid- and small-cap segments. Investors should own businesses with durable earnings, sound balance sheets, pricing power, and credible capital allocation. They should avoid extrapolating recent returns indefinitely. India commands a valuation premium relative to many markets due to its growth profile. Diversification across market capitalisations and styles, periodic rebalancing, and alignment with time horizon and risk capacity are recommended. There will be few places to hide in a global meltdown, making maximum diversification the only true driver of resilience.

Cost efficiency and selectivity become critical in low-return environment

With returns hard to come by, minimising transaction costs and focusing on durable businesses with strong fundamentals is essential for long-term resilience. Investment returns are earned after brokerage, STT, exchange, regulatory fees, fund expenses, and taxes. For long-term investors with low turnover, cumulative transaction costs should be limited. For frequent traders, especially in derivatives, transaction costs can become a meaningful drag on returns. The regulator appears to want to incentivize investors over traders. The proposed UPI charge is unlikely to be material for long-term investors due to low rate and transaction cap. Its impact is more likely on frequent manual transfers or small transactions where costs can accumulate. Transparency of the UPI charge is important to avoid discouraging low-cost participation in capital markets.

India’s growth story remains intact but demands disciplined investing

Despite India’s structural growth premium, non-linear markets require capital preservation, diversification across caps and styles, and alignment with risk capacity. India’s structural growth opportunity remains compelling despite non-linear market moves. Elevated oil prices, global yields, and tighter financial conditions remain important variables for India. Confidence in India’s debt market rests on robust nominal growth, deepening domestic savings, improving policy credibility, and a broadening investor base. High-quality fixed income provides income, liquidity, capital preservation, and diversification against equity volatility for domestic investors. The current inflationary cycle is driven by supply-side shocks, chiefly oil prices and tariffs. Global risks include geopolitical tensions, global trade disruptions, currency volatility, and shifting interest-rate expectations. Absolute resilience is described as a moving target representing a perfectly diversified portfolio across uncorrelated asset classes. Praveen Jagwani said: "The coming 6-12 months would be evaluated not so much on total returns made but total capital saved."