Newspaper Summary 240526

 

Nifty 50’s long-term historical performance reassures FPIs ‘don’t write me off just yet’

By Dhuraivel Gunasekaran, bl. research bureau

When times are tough, it gets even tougher when compared with better-performing players. Indian markets are exactly in that spot today, as demanding valuations, impact on earnings growth from geopolitical turmoil, lack of good AI plays, and currency depreciation push them closer to the bottom of the pile in terms of FPI preference.

In dollar-denominated returns, South Korea’s Kospi is up a staggering 171 per cent in the last one year, Taiwan’s benchmark index TWSE is up 81 per cent, Brazil's Ibovespa is up 45 per cent and the S&P 500 is up 27 per cent. Against this backdrop, the Nifty 50’s negative 15.3 per cent dollar-denominated returns over the past year make it appear like a clear under-performer.

But what if investors move beyond the T20 timeframe and shift to a Test match horizon? The perspectives change a lot. A bl.portfolio analysis of five-year dollar-denominated returns across major global indices indicates that while current challenges are real — and there could be more pain ahead — the Nifty 50’s long-term consistency suggests that, after a valuation reset and a turn in the cycle, the timing of which remains uncertain, better days could return. That is why it is important not to throw the baby out with the bathwater.

CONSISTENCY INTACT

When measured through five-year rolling returns over the past decade, India remains among the stronger-performing markets globally. The Nifty 50 has delivered 10.3 per cent annualised returns (average) in dollar terms, positioning it favourably relative to most peers. Only the S&P 500 (12.3 per cent) and Taiwan (12.1 per cent) outperform India in dollar terms, while key markets such as China (1.1 per cent), Japan (3.4 per cent) and Brazil (2.3 per cent) lag significantly despite having outperformed India over the past year. The distribution analysis of five-year rolling returns in dollar terms, which captures both return potential and downside risk, further highlights India’s relative strength.

NO NEGATIVE RETURN

The data reveal that India has recorded no negative five-year rolling returns, placing it in a select group alongside the S&P 500 and Taiwan’s TWSE. A majority of observations fall within the 10-20 per cent annualised return band (53 per cent), with a further 43 per cent in the 5-10 per cent range. This points to a high degree of return stability and predictability, with limited exposure to extreme outcomes on either the upside or downside.

In contrast, several emerging markets exhibit significantly less favourable return distributions. Brazil, for instance, recorded negative returns in 38 per cent of the observations, while South Korea and China also displayed high frequencies of suboptimal outcomes. Even developed markets such as Germany and Japan showed a more dispersed return profile, particularly on the lower side of the return spectrum. These comparisons highlight a key attribute of Indian equities: consistent long-term compounding rather than sporadic bursts of high performance.

VOLATILITY ISSUE

Further, annualised standard deviation data highlights the volatility profile of major global markets. India’s volatility, at 19.1 per cent, was higher than that of the US and Japan, but lower than most emerging markets such as South Korea, Brazil and Taiwan. The takeaway is straightforward: while near-term volatility may persist amid evolving global macroeconomic conditions, the longer-term data reinforces India’s position as a relatively stable and consistent wealth creator.

This is perhaps something FPIs already understand, having entered, exited and re-entered India multiple times over the years. What domestic investors need to recognise is that while FII re-entry may be inevitable, the timing may not align with market expectations. Several prominent Indian fund managers have already made predictions on this front that have failed badly.

A number of other factors will need to fall into place before sustained foreign inflows return. While it is prudent to acknowledge current challenges and position investments accordingly, it would be equally unwise to write off the India story based solely on one-year performance headlines.

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Distribution of five-year rolling returns in USD terms (%)

India fares well in return stability and lower downside risk

Return range	India	US	China	Japan	South Africa	Brazil	Taiwan	South Korea	Germany
Negative returns	0	0	29	20	25	38	0	36	13
0% to 5%	3	0	70	43	42	33	3	42	23
5% to 10%	43	25	1	38	13	18	25	18	42
10% to 20%	53	75	0	0	20	10	72	4	21
Above 20%	1	0	0	0	0	0	0	0	0

Shopian comes out in strength against drugs

Huge turnout at LG-led rally underscores the district’s changing social landscape By Gulzar Bhat, Srinagar

On a balmy Saturday morning marked by intermittent sunshine and light showers, Lieutenant Governor Manoj Sinha walked through the streets of Shopian, around 50 km south of Srinagar, as thousands joined him on a padayatra under a 100-day anti-drug campaign. Until a few years ago, such a spectacle would have been unimaginable. Once seen as a militancy stronghold in south Kashmir, Shopian was a district where political leaders struggled to hold public meetings and election rallies meant heavy security and thin crowds.

Saturday’s 45,000-50,000 people participated in the rally, pledging support for a drug-free society. “The turnout was unprecedented. I haven’t seen such a large gathering here in years,” said 60-year-old Mohammad Ashraf, who joined the march along the rain-soaked streets.

The administration aims to combat narco-terrorism and curb substance abuse through enforcement, rehabilitation and public outreach. Official data showed agencies seized 19,345 kg of drugs in 2022, 10,307 kg in 2023, 5,219 kg in 2024 and 4,019 kg till November 2025.

Since April 11 this year, authorities have revoked 382 driving licences and cancelled registrations of 386 vehicles. Forty-nine immovable properties were seized and 45 demolished during the crackdown. Officials estimate nearly one million people in Jammu and Kashmir — about 8 per cent of the population — use drugs such as cannabis, opioids and sedatives.

“We will work with full commitment to uproot narco-terrorism and dismantle its ecosystem,” Sinha told the gathering, describing narco-terrorism as “a deliberate attack on the soul of Jammu and Kashmir”. He said drug proceeds were being used by militant groups to procure weapons and fund their operations.

Goldman Sachs, Societe Generale, others buy 1.3% stake in Paytm parent for ₹963 cr

Press Trust of India, New Delhi

Global financial institutions, including Goldman Sachs, Societe Generale, and Citigroup Global Markets, have collectively acquired a 1.34 per cent stake in One97 Communications, the parent company of Paytm, from SAIF Partners and Elevation Capital for ₹963 crore through open market transactions.

Other foreign investors participating in the transaction included Ghisallo Capital Management, BNP Paribas, Copthall Mauritius Investment, and Hong Kong-based Viridian Asset Management. Among domestic institutional investors, Sundaram Mutual Fund (MF), Nippon India MF, Edelweiss Mutual Fund and India Acorn ICAV also bought shares of the fintech firm, according to block deal data executed on the BSE on Friday.

These entities collectively purchased a total of 85.98 lakh shares on the exchange, representing a 1.34 per cent stake in Noida-based One97 Communications. The shares were bought at an average price of ₹1,120.65 a piece, taking the total transaction value to ₹963.60 crore.

Meanwhile, Hong Kong-based private equity firm SAIF Partners, through its affiliates — SAIF III Mauritius Company Ltd and SAIF Partners India IV Ltd — offloaded a combined 80.08 lakh shares of Paytm. Further, Gurugram-based venture capital firm Elevation Capital also disposed of 5.89 lakh shares in the fintech company. The shares were offloaded at the same price, as per the data on the BSE.

Following the transaction, SAIF Partners’ holding in One 97 Communications declined.

Covering interest coverage ratio

By Sai Prabhakar Yadavalli, bl. research bureau SIMPLYPUT

Two colleagues, Pragathi and Shefali, meet in the cafeteria for lunch. Their conversation turns to Indian equities and one of the few bright spots amid the current turmoil: strong corporate balance sheets. They also discuss the other side of the story — how being too conservative can sometimes limit growth.

Shefali: I have been sitting on funds without the confidence to invest in equities. The recent statement by the Prime Minister on the need for austerity has further shaken my confidence.

Pragathi: Same here friend. But I take my chances and always stay invested. Besides, there are few bright spots, which can reassure an investor. Balance sheet strength of companies has been strong, which is reassuring.

Shefali: Please elaborate. How would you quantify it?

Pragathi: One of the measures is to simply ask if the assets on the balance sheet are generating enough cash to service the debt and more. Interest coverage ratio can capture that information. Mathematically, it is the ratio of EBIT or earnings before interest and taxes over interest charges. A ratio well above 2x indicates that the company is delivering enough profits to cover interest and more.

Shefali: Okay. So, what does the ratio now indicate?

Pragathi: Well, according to my findings, after the Q4FY26 results, around 600 Indian companies that had reported results till the first week of May (excluding banks as banks have high leverage via deposits) have an interest service coverage of around 7.5 times.

For a rupee of interest, the companies have generated over ₹7 in EBIT. If one were to stress test Indian companies on financial leverage metrics, I think they will be in a strong position. We had seen this ratio closer to 3.4 times in March 2021: when we were amid a pandemic. But even this is considered a good ratio compared to the absolute zenith of 2010-2012 period. A Credit Suisse analyst had come out with a report – ‘House of Debt’ – in 2012. It was named so because, he said, close to 15 per cent Indian companies had an interest coverage ratio of less than 1. By 2017-18 Indian banks’ NPA ratio was in the 11-12 per cent range. Today, that ratio is less than 1 per cent.

Shefali: Okay. Seems like Indian companies have been extremely cautious. Is there a downside?

Pragathi: Yes. Ratios have risen over the last five years and not because EBIT margins have outperformed. They rose because debt has been underemployed by companies. At some point, investors and current valuations will force companies to pursue growth. It is better for companies to assume a certain degree of manageable risk (debt) before their hand is forced and they announce a Corus style acquisition that backfires. And to be fair, this appears to have thankfully started. Banks now cite commercial and corporate as the fast-growing segments in their loan books over home and retail.

New US rule mandates Green Card seekers to apply from their home country

Sindhu Hariharan, Chennai

The pathway to Green Card for immigrants in the US, including those on H-1B or L-1 visas, just got a bit more complicated as the US immigration authorities brought out a new policy note.

Migrants to the US seeking permanent residency or a Green Card will have to return to their home country to file their applications, per a new US Citizenship and Immigration Service (USCIS) policy note on Friday.

“From now on, an alien who is in the US temporarily and wants a Green Card must return to their home country to apply, except in extraordinary circumstances,” USCIS spokesman Zach Kahler said in a statement.

“Non-immigrants, like students, temporary workers, or people on tourist visas, come to the US for a short time and for a specific purpose. Our system is designed for them to leave when their visit is over. Their visit should not function as the first step in the Green Card process,” the statement said.

SOME EXCEPTIONS

USCIS noted that this was meant for the US to “return to the original intent of the law” and will also ensure that it frees up limited USCIS resources in the US. However, subsequently, in a clarification statement, USCIS spokesman Kahler suggested that Green Card applicants in the US who provide an “economic benefit” or serve “national interest” will be allowed to complete their processing here, without having to leave.

The policy has set off widespread confusion and apprehensions among H-1B and L-1 work visa holders in the US, many of whom are Indians and also in the STEM field. They may now have to rely on visa appointments in their home country consulates and this can lead to a disruption from their personal and professional lives for an indefinite period of time, they fear.

For H-1B and L-1 employees whose visas are “dual intent” the memo suggests they can now expect detailed reviews and not automatic approvals for Green Cards like earlier.

On a case-to-case basis, they may be asked to process it in home countries. Non-dual-intent categories such as student categories including F-1 OPT/STEM OPT, etc., will also face heightened scrutiny of intent and prior conduct, immigration attorneys said.

Immigration law firm Reddy Neumann Brown in a note said, “The message is clear: Meeting the eligibility requirements alone may no longer be enough. From tax compliance and lawful status history to community ties, family integration, and economic contributions, applicants should now be prepared to proactively document the positive equities supporting their I-485 case”.

NEW STANDARD

Immigration lawyer Poorvi Chothani of LawQuest said that what has changed is the standard of review, not the law. “The memorandum does not change any laws or regulations and does not eliminate adjustment of status (AOS) as a legal avenue to apply for a Green Card. Section 245 of the Immigration and Nationality Act continues to authorise AOS in the US for eligible applicants at USCIS’ discretion,” she said, noting that legal challenges are widely expected.

Andrew NG, co-founder of Coursera and a top AI entrepreneur in the US, said in a post on X that “The new White House policy requiring Green Card applicants to apply from outside the US is a capricious attack on legal immigration. It will hurt families, leave us with fewer doctors, teachers and scientists, and hurt American competitiveness in AI”.

H-1B APPLICANTS DIP

Separately, releasing its FY27 numbers for H-1B registrations, the USCIS said that the number dipped by 38.5 per cent, from 343,981 in fiscal year 2026 to just 211,600 in fiscal year 2027. “We’re approving more applicants with advanced degrees and higher salaries especially those who studied at US universities,” it added.

TAX QUERY

By SUDHAKAR SETHURAMAN

Question: Is withdrawal from NPS Tier II equity fund taxable as long-term capital gains (LTCG) at 12.5 per cent when held for more than one year or as income from other sources at slab rates? — Murli Krishnamurthy

Answer: Under the Income-Tax Act, 2025, units held in an NPS Tier II constitute capital assets, and gains arising on withdrawal from the same are classified as capital gains and taxed at the applicable income-tax slab rate. Although an NPS Tier II account may be fully invested in equities, units issued under the NPS are not treated as equity mutual fund units for tax purposes.

Hence, while classified as capital assets, NPS Tier II (equity scheme) units do not qualify for exemptions such as the shorter holding period for determining long-term or short-term status (12 months) or the ₹1.25 lakh exemption threshold limit, which are applicable specifically to equity shares or equity mutual fund units. Accordingly, withdrawal from an NPS Tier II equity fund is taxable as short-term capital gains if the units are held for more than one year but less than 24 months.

The sum of the parts exceeds the whole

INDEX WISE. We explain why a Nifty 50, Next 50, Midcap and Smallcap mix beats the Nifty 500 By Dhuraivel Gunasekaran, bl. research bureau

Passive investing is gathering momentum in India, with investors increasingly weighing index strategies to identify the most efficient route to long-term wealth creation. The Nifty 500, which covers about 92 per cent of listed market capitalisation on the NSE, serves as a broad proxy for the equity market. For many, a single index fund or exchange traded fund (ETF) tracking the Nifty 500 offers a simple, low-maintenance way to gain diversified exposure.

Yet, a bl.portfolio analysis shows that a structured mix of the Nifty 50, Nifty Next 50, Nifty Midcap 150 and Nifty Smallcap 250 can deliver superior long-term outcomes compared to the Nifty 500 alone. Based on 10-year rolling return data over the last 20 years, the Nifty 500 TRI generated an average CAGR of 12.7 per cent. An equal-weight allocation across the four indices, however, delivered about 14.3 per cent, indicating an outperformance of 1.60 percentage points that can meaningfully enhance long-term compounding. For investors starting early, a simple equal allocation across these indices offers exposure across the full market-cap spectrum of large-, mid- and small-caps.

LARGE-CAP BIAS

The limitation of the Nifty 500 lies in its construction. As of April 2026, nearly 57 per cent of the index weight is concentrated in the Nifty 50, with the Nifty Next 50 accounting for another 13 per cent. In effect, close to 70 per cent of the index is tilted towards the top 100 companies — large-caps. While this bias lends stability, it also skews the portfolio towards mature businesses where earnings growth may taper over time.

In an emerging market like India, mid-sized and emerging companies often contribute alpha, capturing incremental growth beyond large, mature firms. This skew is inherent to the free-float market-cap methodology, where larger companies automatically get a bigger share. For investors seeking true market-wide participation, such concentration can act as a structural drag. A multi-index allocation helps address this imbalance by distributing exposure more evenly across market segments.

WHY A COMBINATION WORKS

The advantage of this mix shows up in returns, sector spread, and risk management.

• Broader sector play: As of April 2026, banking accounts for 19.5 per cent of the Nifty 500, versus 12.3 per cent in the equal-weight combination. The combination allocates more to broader financials (11.4 per cent vs 8.8 per cent), capturing NBFCs, microfinance and fintech players. It also carries higher exposure to capital goods, healthcare, automobiles, and power — sectors closely aligned with India’s domestic growth narrative. Additionally, sectors like business services, education, and media barely exist in the Nifty 500 but are brought in by the combination strategy.
• Better risk management: Unlike the Nifty 500 where large-caps dominate by default, the combination approach allows investors to consciously set their exposure. An equal 25 per cent allocation balances stability with growth. Furthermore, it creates a disciplined rebalancing framework. Indian equities exhibit cyclical leadership: large-caps lead during global risk-off phases, mid-caps during steady domestic growth, and small-caps in liquidity-driven rallies. A multi-index strategy automatically captures this rotation.

TAKEAWAYS

Around 10 passive funds currently track the Nifty 500 and BSE 500, managing over ₹5,500 crore. While Nifty 500 is a convenient benchmark, its inherent large-cap bias may constrain long-term, market-wide participation. A combination approach offers a more nuanced alternative, reducing concentration risk and giving investors greater control over allocation. Historical data shows the combination strategy outperformed the Nifty 500 in 12 out of 20 periods over the last 20 years.

However, a multi-index combination is more complex, requiring monitoring, rebalancing, and awareness of overlapping exposures. Trading costs and liquidity constraints in smaller indices mean that disciplined rebalancing is essential.

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KEY INSIGHTS

• Index combination outperforms the Nifty 500 over long-term
• Nifty 500 basket is tilted towards large companies
• Combining multiple indices does require monitoring and rebalancing