India Investor Conference 2026 Highlights on Growth, FPI Flows and Markets

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The second session of the India Investor Conference 2026 brought together two experienced voices from the worlds of investing and policymaking. The discussion featured Sankaran Naren, Executive Director and Chief Investment Officer at ICICI Prudential Mutual Fund, and Ananth Narayan, Professor of Practice at IIT Bombay School of Management and former Whole Time Member of SEBI.

The conversation focused on recent policy announcements, foreign investment flows, India's growth outlook, debt markets, equity valuations, artificial intelligence, and the opportunities and challenges that lie ahead for investors.

Reserve Bank Measures and Their Potential Impact

The discussion opened with the Reserve Bank of India's recent announcement related to Foreign Currency Non Resident deposits.

Ananth Narayan explained that while the detailed framework was still awaited, the proposal appeared highly attractive if it followed the structure adopted in 2013. According to him, the Reserve Bank's willingness to absorb exchange rate risk represented a significant incentive.

He explained that banks could potentially raise deposits at attractive rates and deploy those funds into government securities, creating a spread that would benefit both banks and depositors. He added that the scheme could attract substantial inflows if leverage provisions similar to those used in 2013 were allowed.

Narayan noted that market participants were discussing figures of 40 to 50 billion dollars and said that such estimates could be achievable under the right framework.

He also described the announcement as a strong statement of confidence from the Reserve Bank, aimed at building buffers and reassuring markets about the stability of the rupee.

Breaking the Negative Cycle Around the Rupee

Sankaran Naren viewed the move as an effort to break what he described as a vicious cycle surrounding perceptions of the rupee.

Drawing on examples from earlier financial interventions in India and abroad, he argued that policymakers sometimes need to act decisively to change market psychology. According to him, India currently has strengths such as the absence of a significant current account deficit and substantial gold reserves held by both citizens and the Reserve Bank.

Naren said the cost of breaking this negative cycle appeared manageable and could help improve sentiment toward Indian debt markets.

While he acknowledged that foreign investment in equities depends on a broader set of global factors, he viewed the policy action as a positive development for debt markets and for confidence in the currency.

Why Changes in Taxation Could Matter for Foreign Investors

A major part of the discussion focused on the government's decision to remove withholding tax and capital gains tax obligations for foreign investors in government bonds.

Ananth Narayan described this as one of the most consequential policy announcements from a medium-term perspective.

He explained that many countries follow a residence-based taxation system where investors pay taxes in their home jurisdictions. India had become an outlier by requiring foreign investors to deal with tax obligations locally.

Narayan highlighted several practical challenges that foreign investors faced.

Investors operating through funds often encountered withholding tax complications. Tax liabilities were calculated in rupees even when investors might have suffered losses in their home currency. Administrative requirements also created operational difficulties during exits.

According to him, removing these frictions could make India more attractive to foreign investors and improve the country's chances of inclusion in the Bloomberg Global Aggregate Index.

He suggested that such inclusion could potentially attract passive flows of 25 to 30 billion dollars while also encouraging participation from institutions such as insurance companies and sovereign funds.

Debt Markets Look Better Positioned

Naren agreed that developments in debt markets appeared encouraging.

He pointed to two major positives. Currency concerns were being addressed through the Reserve Bank's actions, while taxation issues had been eased through government measures.

He said these factors improved the prospects for debt market participation and strengthened the case for global bond index inclusion.

At the same time, both speakers cautioned that investors would continue comparing Indian yields with those available in major markets such as the United States and Japan.

Narayan emphasized that the recent announcements should be viewed as measures that improve conditions for future inflows rather than guarantees of immediate capital movement.

India's Growth Story Remains in Focus

The discussion then shifted toward economic growth.

Latha Venkatesh highlighted that India's fourth-quarter gross domestic product growth had exceeded market expectations.

Naren attributed part of the previous year's strong performance to supportive measures such as tax reductions and liquidity support. He also pointed out that uncertainty remained around factors including weather conditions and geopolitical developments.

As a result, he viewed the Reserve Bank's cautious growth forecasts as reasonable.

The conversation also touched upon the broader global environment. Strong economic data from the United States, Japan and other major economies led to questions about whether global growth was proving more resilient than many had expected.

Naren acknowledged that a favourable combination of factors, including lower oil prices and continued momentum in artificial intelligence-related investment, could support stronger growth outcomes across economies.

Earnings and Employment Present a Positive Picture

Ananth Narayan argued that several indicators pointed to encouraging trends within India.

He noted that while benchmark indices may not fully reflect the broader picture, earnings growth across a wider universe of listed companies appeared healthy.

He also referred to employment data that suggested robust job creation, including growth in non-farm employment.

According to him, both earnings and employment trends indicated that positive developments were taking place beneath the surface, even as markets remained focused on uncertainties related to energy prices and weather conditions.

The Debate Around Capital Formation

One of the most important discussions centred on the role of debt markets in supporting economic growth.

Narayan argued that India's debt markets require greater attention. He suggested that taxation structures currently encourage investors to favour equities over fixed-income products.

According to him, this has implications for capital formation because debt markets play an important role in funding long-term investments.

He suggested that policymakers should consider creating a more balanced taxation framework across asset classes so that investment decisions are driven by economic merit rather than tax treatment.

The broader theme was that stronger debt markets could support growth while improving the overall efficiency of capital allocation.

Private Banks Could Benefit From a Shift in Sentiment

The discussion also addressed sectoral opportunities.

Naren observed that many stocks with historically high foreign institutional investor ownership had faced sustained selling pressure over the past twenty months.

He suggested that private sector banks fell into this category.

According to him, foreign investors held significant positions in these banks and often sold them when reducing exposure to India. As a result, private banks could represent a compelling opportunity from a three-year perspective.

His view was based on positioning rather than fundamental concerns about individual banks.

Artificial Intelligence and India's Position

Artificial intelligence emerged as another key topic.

Ananth Narayan acknowledged concerns around technological disruption but argued that India was showing encouraging signs of adaptation.

He pointed to strong adoption rates, increasing research activity and significant contributions from Indian developers.

While India may not have led the development of foundational models, he suggested that opportunities were emerging in the application layer.

He also noted that software services companies and Global Capability Centres could play an important role as businesses adopt more advanced artificial intelligence systems.

Sectors That Interest Sankaran Naren

When asked about sectors he currently favoured, Naren identified oil and gas and banking as areas that appeared attractive.

He noted that these sectors were not receiving widespread attention from investors.

He also mentioned that his team was studying opportunities in fast-moving consumer goods and information technology, though both sectors were currently dealing with slower growth trends.

The Next Phase of Reforms

Looking ahead, Ananth Narayan said India was in a relatively strong position but should use that strength to pursue further reforms.

He highlighted manufacturing as an area that requires continued attention. He also stressed the importance of encouraging innovation and private sector investment.

Narayan argued that policymakers should engage closely with businesses to understand what is needed to accelerate investment activity.

He also reiterated the importance of improving capital formation through measures that support both debt and equity markets.

Key Takeaways for Investors

The session offered a balanced mix of policy insight and market perspective.

The speakers viewed recent policy measures as important steps toward improving conditions for foreign capital, strengthening confidence in the rupee and enhancing the attractiveness of Indian debt markets.

They also highlighted encouraging trends in earnings, employment and artificial intelligence adoption.

While uncertainties related to oil prices and global events remain, the discussion suggested that India's long-term growth story continues to be supported by structural strengths, policy evolution and opportunities across several sectors of the economy.