Veteran investor Prashant Jain of 3P Investment Managers projects 15% annual equity returns for India over the next three years. He expects the country's balance of payments to shift to a $50 billion surplus in FY27 as capital inflows improve and import pressures from gold and oil decline.
Prashant Jain, heading 3P Investment Managers, has expressed a positive outlook on the Indian economy, stating that the major external pressures that weighed on the country’s balance of payments over the past two years are now reversing. According to the firm’s recent investor communication, this shift is expected to create a more stable environment for equities, with the firm anticipating annualized returns of approximately 14% to 15% over the next three years.
Factors Supporting the Economic Shift
The optimism stems from a noticeable improvement in India's external account dynamics. Historically, high gold imports, elevated crude oil prices, and significant foreign portfolio outflows acted as major headwinds. Jain notes that these pressures are easing. Gold imports, which had previously surged to an annualized range of $50 billion to $80 billion, are expected to moderate following a recent hike in import duties to 15% and cooling global gold prices. Furthermore, crude oil prices have settled near $70 per barrel, providing relief to the current account deficit.
On the capital account side, 3P Investment Managers expects net foreign direct investment to improve in FY27. While multinational corporations and private equity firms have seen a phase of exits, gross foreign direct investment into India remains steady at roughly $95 billion in FY26, with significant capital flowing into sectors such as banking, manufacturing, data centers, and infrastructure. Additionally, the firm believes that foreign portfolio investor selling has peaked, with early signs of renewed buying observed in June.
Reserve Accumulation and Policy Impact
Policy initiatives from the government and the Reserve Bank of India are expected to play a critical role in bolstering foreign exchange reserves. Projections indicate that measures such as foreign currency non-resident bank deposits and external commercial borrowings could attract between $70 billion and $100 billion in the coming months. Moreover, ongoing efforts related to tax exemptions and bond market accessibility are expected to facilitate India’s inclusion in global bond indices, potentially drawing an additional $20 billion to $25 billion within the next year.
Investors should monitor how these external improvements translate into domestic economic stability. While 3P Investment Managers anticipates a balance of payments surplus of about $50 billion in FY27, the actual impact on market performance will depend on continued corporate earnings growth and the sustainability of global oil prices. The firm plans to selectively increase exposure to small- and mid-cap segments, suggesting that despite a broader positive macroeconomic view, bottom-up selection remains a key component of their investment strategy.