First Global founder Devina Mehra advises Indian investors to diversify 30-40% of their wealth into global assets to hedge against rupee depreciation. She warns that excessive focus on the current AI sector may involve high risks due to debt-heavy capital spending. Investors are encouraged to focus on long-term discipline rather than reacting to short-term market noise.
First Global founder Devina Mehra has highlighted the need for Indian investors to look beyond domestic borders, suggesting an allocation of 30% to 40% in global assets. This view stems from the fact that the Indian equity market accounts for a relatively small portion of global market capitalization, which can lead to concentration risk. By holding international assets, investors can protect their portfolios against the long-term trend of rupee depreciation against the US dollar.
Analyzing the AI Investment Cycle
Mehra has cautioned against the current intense focus on the artificial intelligence sector, comparing the current wave of investment to historical speculative cycles. A key concern is that substantial capital is being deployed into technology projects backed by heavy debt, while the return on this capital remains uncertain. The technology sector, particularly semiconductors, is historically known for being highly cyclical and volatile. This means that while growth potential exists, the risk of a market correction increases when companies spend heavily on new capacity that may struggle to meet long-term profit expectations.
The Indian Market Outlook
Despite the push for geographic diversification, the outlook for the Indian market remains constructive. Historically, periods where Indian indices have remained flat or stagnant are often followed by phases of strong performance. Investors are encouraged to avoid reacting to short-term fear or daily market volatility. Building wealth in equities often requires the ability to stay invested through long stretches of flat performance, a strategy that prioritizes long-term outcomes over immediate gains. Discipline in maintaining an asset allocation for seven to eight years is described as a more effective wealth-building tool than attempting to time the market.
Practical Challenges in Global Investing
For Indian investors looking to implement this strategy, there are practical hurdles. Many domestic mutual funds that provide exposure to international stocks have faced temporary restrictions on new investments due to regulatory limits set by the Reserve Bank of India on overseas remittances. Because of these capacity limits, some funds may be closed or restricted for new investors.
Direct global brokerage accounts or broad-based index funds, such as those tracking the MSCI ACWI, offer alternative paths for those seeking international exposure. Additionally, while gold is traditionally seen as a safe investment, its ability to provide real gains in a liberalized economy has been mixed, suggesting it should only form a small part of a broader, diversified portfolio. The key monitorable for investors remains their personal risk appetite and the long-term stability of their asset allocation, rather than chasing trends in volatile sectors.