Exports, the rupee and FII flows: Mirae Asset CIO on what’s driving markets now

Surana also said foreign investor outflows from Indian equities reflect a confluence of factors—slower earnings growth, valuation normalization, rupee depreciation, limited exposure to the global artificial intelligence boom, and trade-related uncertainty. Many of these headwinds, he added, now appear largely priced into market valuations.

Edited excerpts from an interview:

Indian exports to the US grew 23% year-on-year in November after falling 9% in October. Is this a demand reversal or a one-off due to front-loading ahead of tariff or policy uncertainty? Do you expect further growth?

The November rebound reflects resilience, but it is likely influenced by base effects, a higher number of working days after the festive period, and some residual front-loading amid policy uncertainty.

Export momentum to the US is expected to remain uneven. A key concern is the potential second-order impact on labour-intensive sectors such as textiles, gems and jewellery, and seafood, which together employ several million workers. While aggregate export exposure is manageable, prolonged trade frictions could have adverse employment and income effects if left unresolved.

Sustained growth will depend on progress in US-India trade negotiations, tariff clarity, and a broader recovery in global demand.

Does a weakening rupee meaningfully boost exports? Are exports price-sensitive enough, and do you expect further rupee depreciation?

Recent rupee weakness reflects multiple factors, including slower capital account inflows, subdued foreign direct investment, significant foreign institutional investor (FII) outflows, and corporate foreign-exchange positioning.

A depreciating rupee generally supports exports by improving price competitiveness. However, export performance depends not only on cost competitiveness but also on supply-chain reliability and execution. India’s export basket is less price-sensitive than in the past due to a higher share of segments where India has a clear competitive advantage, such as engineering goods, pharmaceuticals, and services.

Over the medium term, given India’s relatively low inflation and a modest inflation differential with the US, rupee depreciation is likely to remain gradual, in the range of 2-3% annually.

Can India act as a hedge against an artificial intelligence (AI) bubble, prompting global fund diversification?

India’s relative underperformance in 2025 has been driven more by earnings fatigue than by capital shifting exclusively toward AI-led markets. Global equity performance has been narrow, with gains concentrated in a small set of US AI stocks, while broader markets have struggled.

India may benefit at the margin from volatility in global AI themes. More importantly, India offers a diversified, long-term structural growth story across financials, manufacturing, consumption, and services, rather than reliance on a single technological theme.

India’s valuation premium versus other emerging markets has normalized. Will this reverse FII outflows?

FII outflows reflect a combination of slower earnings growth, valuation normalization, rupee depreciation, limited AI exposure, and trade-related uncertainties. Many of these factors now appear largely priced in.

Domestic institutional investors remain a strong counterbalance, having invested nearly ₹18 trillion over the past five years, compared with cumulative net FII outflows of about ₹0.9 trillion. This underscores the growing structural importance of domestic capital.

Do you have a contrarian view on any sector?

At present, valuations appear broadly balanced, with no sector standing out as deeply undervalued. However, segments of mass discretionary consumption could recover, supported by tax relief, GST rationalization, easing interest rates, state welfare schemes, and the expected implementation of the Eighth Pay Commission.

Conversely, capital goods may warrant caution due to elevated valuations following a strong multi-year re-rating.

What could trigger a sustained market uptrend from here?

Key triggers include improving earnings visibility, stable macroeconomic indicators, low real interest rates, and continued domestic inflows. Earnings growth for FY27 is projected at approximately 11-12% for large caps and 17-18% for mid-caps, aided by a favourable FY26 base.

Policy measures such as GST 2.0, income-tax rationalization, higher state-level capital expenditure, and supportive monetary actions could further strengthen the recovery.

The IndiGo episode underscored the importance—and limitations—of a company’s board. When making stock calls, how do you account for governance gaps or risks that may not be fully flagged by the board?

Governance is a non-negotiable pillar of our investment process.

While we do not comment on specific companies, the case highlighted, in our view, does not represent a core corporate governance issue but rather a special situation arising from changes in technical norms.

All companies face periods of stress; the key differentiator is management’s ability to respond transparently and emerge stronger over time.

The Platinum SIF brand was launched in June, but no products have followed. Why?

Platinum SIF is a new segment for us. We are undertaking a detailed evaluation and have made a senior-level hire to ensure that products are launched at the appropriate time, with clear differentiation and a robust structure.

Mirae’s funds have seen a comeback, with many now in the top quartile. What has changed?

Earlier drawdowns were largely cyclical in nature, reflecting our diversified exposure to banking and mass consumption, which underperformed in 2024 relative to industrials. The recent recovery, without any material change to portfolios, suggests that the softer phase was temporary rather than indicative of permanent capital impairment.

Our investment framework remains consistent, focused on high-quality businesses and disciplined valuations. Importantly, all our funds with a 10-year track record remain consistently in the top quartile.