Last week, a long-standing client, a senior corporate executive from Gurugram, looked at me over a cup of coffee and asked,
“Taresh, markets are at an all-time high, headlines are scary, and the rupee is slipping. Are we really safe staying invested?”
I smiled and told him what I have been telling most families this month:
“This is not the time to panic. This is the time to understand the story behind the numbers – and then follow a disciplined plan.”
In this article, I want to share with you, in simple language, how I’m reading the global and Indian economy right now, and what that means for your mutual fund portfolio.
1. The world is not collapsing – it is just tired
Globally, we have come a long way from the chaos of Covid and the energy shock that followed. Inflation, which was the monster in the room for the last couple of years, has started cooling off across major economies. Central banks are not rushing to raise interest rates every few months. They are breathing a little easier.
At the same time, many governments – especially in the US, Japan and China – are still spending huge amounts of money to keep their economies supported. Think of it like a patient who has come out of the ICU, but is still on strong medicines and needs rest.
For investors, this combination means two things:
1. The fear of extreme interest-rate hikes has reduced.
2. The world is still carrying a lot of debt and liquidity. That’s good for markets in the short term, but a risk in the long term.
This is why I keep telling my clients: do not build your financial plan on heroic assumptions about global growth. Build it on realistic expectations and a margin of safety.
2. China, the US – and where India fits in
Whenever I talk to globally aware professionals, China and the US always come up.
On China, my view is simple: they have built a massive manufacturing machine and are now trying to move aggressively into future technologies – drones, EVs, batteries, solar, new-age pharma. But because they have invested so heavily for so long, there is excess capacity in many sectors. This creates pressure on global prices and trade relationships.
On the US side, technology and AI continue to drive the story. American companies are spending big on data centres, chips and AI infrastructure. That is why US markets remain dominated by a handful of tech giants. But even these superstar stocks have seen sharp corrections from their peaks, reminding us that no theme goes up in a straight line.
Where does India sit between these two giants?
We are not as rich or technologically advanced as the US, and we do not yet have the manufacturing scale of China. But we have three big advantages:
1. Young, growing population.
2. Improving infrastructure and digital rails.
3. A relatively conservative approach to debt.
This combination makes India a very attractive “China + 1” destination for global investors and businesses looking to diversify.
3. India’s real story: domestic demand and cleaner balance sheets
I often say in my sessions, “India’s biggest growth driver sits in your own kitchen.”
What I mean is: domestic consumption.
The latest numbers show that India’s GDP growth is strong, and a big part of that comes from private consumption – families spending on homes, education, travel, vehicles, gadgets, and better lifestyles. Services like travel, hospitality and financial services are doing well. Manufacturing has had its ups and downs, but the underlying trend is gradually improving.
Two things stand out for me as a financial planner:
1. Rural wages are slowly improving in real terms.
When rural incomes go up, it supports demand for everything from basic goods to two-wheelers and affordable housing.
2. Corporate and bank balance sheets are much cleaner than a decade ago.
Non-performing assets have come down sharply, and corporate debt levels relative to equity are at multi-year lows.
This is very different from the situation we saw around 2012–2013, when balance sheets were stressed and banks were struggling with bad loans. Today, when a company announces a new project, lenders are more willing, and the system is better capitalised.
That is why we are seeing large new investment announcements – in manufacturing, infrastructure, renewables, data centres and more. This is not just “narrative”; it is visible in project data and in the order books of many companies.
4. The uncomfortable part: rupee weakness and tariffs
Let us also talk about the parts of the story that do not feel so good.
The rupee has weakened to record levels against the dollar. For someone planning to send a child abroad or travelling frequently, this hits the pocket directly.
When one of my NRI clients visited recently, he joked, “Taresh, my salary in dollars is going up every time the rupee falls – but my family’s grocery bill in India is not finding it funny!”
From a portfolio point of view, however, a weak rupee has two sides:
• It is negative for imports and for those with dollar expenses.
• It is positive for exporters, IT services, and global-facing companies whose earnings are in dollars.
Another challenge is tariffs from the US on some of our labour-intensive exports like textiles, gems & jewellery and certain manufactured goods. Margins are already thin in these sectors, so tariffs hurt.
The encouraging part is how India is responding:
• The government has provided tax rebates and GST cuts in certain areas to support domestic demand.
• There is a clear push to diversify export markets and move up the value chain.
For you as an investor, this reinforces what I often repeat: do not build your portfolio on one sector, one geography or one currency.
5. Markets at all-time highs… really?
Headlines say “Nifty at record high”. But when I look under the hood, the picture is more nuanced.
• The main indices are indeed near highs.
• However, a large number of individual stocks – especially in mid and small caps – are 10–20–30% below their recent peaks.
• Foreign investors have been net sellers this year, while Indian mutual fund investors (through SIPs) and domestic institutions have steadily bought.
Valuation indicators tell a similar story:
• At index level, large caps are around their long-term average valuations.
• Small caps, on the other hand, are trading at a significant premium to their historical averages.
• Market-cap-to-GDP is at elevated levels, which suggests we should not expect the kind of outsized returns we saw immediately after Covid.
So when a young couple comes to me and says, “Taresh, my colleague doubled his money in small caps in the last three years; can we repeat that quickly?”, I gently bring them back to reality.
The period ahead is likely to reward:
• quality over excitement,
• patience over trading,
• and asset allocation over stock tips.
6. How I’m positioning client portfolios now
Bringing all of this together, here is how I’m broadly thinking about portfolios for the next 3–5 years. Of course, exact allocations depend on individual goals, risk profile and time horizon.
1. Equity – still the growth engine, but with moderated expectations
• Core through diversified large-cap and flexi-cap funds.
• Selective mid-cap and small-cap exposure through high-quality funds, not through random “momentum” bets.
• Focus on themes aligned with domestic demand, formalisation, infrastructure and financialisation of savings.
2. Debt – the stabiliser in a volatile world
• A sensible mix of short- to medium-duration debt funds and high-quality corporate bond funds.
• These are not meant to “beat equity” but to give steadier returns and provide shock absorbers in your portfolio.
3. Gold – the insurance layer
• A modest allocation to gold or gold ETFs/fofs helps during periods of global stress, high debt and currency weakness.
• It is not a return-maximiser, but a volatility-reducing asset.
4. Cash and contingency – your emotional safety net
• 6–12 months of essential expenses in liquid or overnight funds, so that temporary market corrections do not force you to redeem long-term investments.
Underneath all this sits my usual three-bucket framework:
• Safety bucket – emergency money, short-term goals.
• Growth bucket – long-term equity and growth assets.
• Freedom bucket – aspirational goals and legacy planning.
When these buckets are properly defined, clients worry less about short-term market swings.
7. Two short stories from my practice
Let me leave you with two real anecdotes (with names changed).
Story 1: Rajiv – the anxious senior professional
Rajiv, 48, works at a multinational and has been investing through SIPs for over a decade. Seeing foreign investors sell this year and reading about US tariffs, he wanted to pause all his equity SIPs “till things settle”.
We re-looked at his goals: daughter’s education in 6 years, retirement in 12–15 years. When he saw that even a 20–25% temporary fall in equity markets would not derail his plan – because of his debt and cash buffers – he decided to continue his SIPs and, in fact, increase them slightly during corrections.
Story 2: Seema – the newly-widowed 60-year-old
Seema inherited a sizeable portfolio after her husband’s passing. Her biggest fear was: “If markets fall from here, will I lose my financial independence?”
We restructured her investments into clear buckets:
• guaranteed and high-quality debt for her basic lifestyle for the next 20 years,
• a measured equity exposure for inflation protection and legacy,
• and a small allocation to gold.
Once she saw that her essential expenses were secured irrespective of market noise, she felt comfortable staying invested instead of rushing to sell at every negative headline.
⸻
8. The way forward: plan, not prediction
No presentation, no expert and no headline can perfectly predict what will happen in 2026 or 2027. We do not control global debt, AI bubbles, or US politics.
What we do control is:
• how clearly our goals are defined,
• how thoughtfully our asset allocation is designed,
• and how disciplined we are in sticking to that plan.
As I often tell my clients:
“Financial Planning is the real wealth – because a plan is greater than a salary, and planning is the new earning.”
Summary
My December 2025 Global Outlook Made Simple
The world economy is no longer in a crisis zone. Inflation is cooling, interest rates are stabilizing, and growth is slow but steady.
India’s real story is domestic demand. Families are spending, banks are healthier, companies are announcing new projects, and rural incomes are improving.
Global noise will continue—AI bubbles, US-China tensions, tariffs, rupee weakness.
But your financial stability doesn’t depend on predicting headlines.
It depends on a structured plan, not reactions.
This is why India continues to be one of the world’s strongest growth stories for long-term investors.
For Indian investors, this means:
1. Lower risk of sudden rate hikes
2. Better stability in debt funds
3. Continued long-term opportunity in equities
The Nifty is at highs, yes.
But:
• Most mid & small caps are actually 10–30% below their recent peaks
• FPIs are selling, but Indian SIP investors are buying
• Valuations require realistic expectations
This is a quality-first, patience-first market.
What I’m Recommending to My Clients
My suggested positioning for the next 3–5 years:
• Core equity via large-cap & flexi-cap funds
• very selective mid/small-cap exposure—quality only
• Short–medium duration debt funds for stability
• A small allocation to gold for diversification
• A strong emergency bucket to handle volatility
This is the structure behind your long-term success.
Stay invested. Stay disciplined.
-CFP® Taresh Bhatia
CERTIFIED FINANCIAL PLANNER®
Founder — The Richness Academy
“Financial Planning is the Real Wealth.”
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Disclaimer: The views expressed are for educational purposes only and do not constitute financial, investment, tax, or legal advice. Please consult qualified professionals before making decisions. Mutual fund investments are subject to market risks.
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The author of this article, Taresh Bhatia, is a Certified Financial Planner® and advocate for female empowerment. For more information and personalized financial guidance, please contact taresh@tareshbhatia.com
He has authored an Amazon best seller-“The Richness Principles”. He is the Coach and founder of The Richness Academy, an online coaching courses forum. This article serves educational purposes only and does not constitute financial advice. Consultation with a qualified financial professional is recommended before making any investment decisions. An educational purpose article only and not any advice whatsoever.
©️2025: All Rights Reserved. Taresh Bhatia. Certified Financial Planner®
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