By 
By: Karnvir Mundrey
Prashant Jain spent an hour telling a room of investors things they did not want to hear. The uncomfortable parts are the most useful.
Most market commentary is a form of flattery. It tells you the theme you already own is the right theme, that the returns you have grown used to are the returns you should expect, and that the thing you are worried about is priced in.
A recent fireside chat with Prashant Jain does almost the opposite. Jain spent nearly three decades managing money at HDFC Mutual Fund and now runs 3P Investment Managers as founder and Chief Investment Officer; the firm managed approximately ₹24,098 crore – about $2.5 billion – for roughly 1,500 families as of 30 June 2026. Across an hour, he argued against the infrastructure supercycle narrative, against the return expectations most Indian investors carry, against the small-cap enthusiasm that has defined the last five years, and against the instinct to diversify into global equities.
The Katha Upanishad opens with a boy named Nachiketa standing before Yama, lord of death, who offers him wealth, cattle, long life, and every pleasure the world contains. Nachiketa refuses all of it and asks the harder question instead. Yama’s response draws the distinction the entire text rests on:
anyacchreyo’nyadutaiva preyaste ubhe nānārthe puruṣaṁ sinītaḥ — The good and the pleasant are two different things, and they pull a person in different directions. (Katha Upanishad 1.2.2)
Shreyas is what is genuinely beneficial. Preyas is what is immediately agreeable. Most investment commentary sells preyas.
Strip out the consensus material and six claims remain that are genuinely non-consensus. Each is set below against the historical record, against the current numbers, and against what the best investors elsewhere concluded independently.
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1. India’s currency problem was never a competitiveness problem
The standard story runs: India imports most of its oil, so oil spikes hurt the rupee, so the rupee must weaken structurally.
Jain rejects the causal chain. He accepts the import dependence, but argues the oil intensity of Indian GDP has fallen sharply, and points to 2007, when crude ran far higher in a much more fragile economy without breaking anything. What actually pressured the rupee, on his account, was the capital account — foreign institutions, multinationals and private equity funds selling Indian assets, and those dollars leaving.
The distinction matters because the two have different half-lives. A structural trade deficit persists. A stock adjustment ends when the position is sold down.
The record supports him, and more strongly than he claimed. Over the thirty-six months to August 2026, foreign portfolio investors sold roughly ₹10 trillion of Indian equities. Domestic institutions bought ₹19.21 trillion. In FY26 alone, SEBI’s annual report puts DII net inflows at a record ₹8.5 lakh crore against FPI equity outflows of ₹1.8 lakh crore. Calendar 2026 has already produced the heaviest foreign selling in any year since 1993 – the year foreigners were first permitted to buy Indian stocks at all.
And the market did not break. The Sensex peaked at 85,706 in November 2025 and trades near 78,000 now – a modest drawdown against the largest foreign exodus in the history of foreign participation.
The ownership shift underneath is the real story. DII holdings in the NSE-listed universe hit an all-time high of 17 per cent while FPI ownership fell to a fifteen-year low of 15.8 per cent. CDSL alone reported 18.82 crore investor accounts at end-July 2026, though one person may hold several. Monthly SIP contributions run around ₹32,000 crore. That is the machine doing the absorbing.
The practical inference: do not sell Indian equities merely because foreigners are selling. They may be selling because US rates rose, because their own investors are redeeming, or because another market became fashionable. None of that makes Indian companies worse businesses. Look at valuations, earnings and your own allocation – not the passport of the seller.
Buffett made this exact distinction in public, at the worst possible moment. In October 2008, with credit markets frozen and American investors fleeing into Treasuries, he published an op-ed announcing he was moving his own money into US equities. His argument was that the flight was about sentiment and liquidity, not the long-run earning power of American business – and that the two get confused precisely when it matters most. He was early. Stocks fell substantially further before turning. He was also right.
There is a scene in the Sundara Kanda where Hanuman sits at the edge of the ocean, unable to see how anyone could cross it, until Jambavan reminds him what he is actually capable of. The strength was never absent. The memory of it was.
The 1991 counterfactual. In the last days of May 1991, chartered aircraft carried crates of gold out of India in secret; the government said nothing while the shipments were in the air, and the public learned about it roughly a week later. Across two consignments that year, India pledged some 67 tonnes – 47 to the Bank of England, 20 to the Union Bank of Switzerland – to raise about $600 million. Reserves covered roughly three weeks of imports. The Chandra Shekhar government fell shortly afterwards, accused of pawning the nation’s gold.
Now run the arc forward. Reserves are around $690 billion. The RBI holds over 800 tonnes of gold, having bought 200 tonnes from the IMF in 2009 and quietly flown 100 tonnes back into domestic vaults in FY24.
What financed the reversal was services. The Ministry of Commerce puts India’s services exports at $418.31 billion in FY2025-26, generating a services trade surplus of $213.89 billion that absorbs a large part of the merchandise deficit. Roughly 1,800 global capability centres now employ close to two million people directly.
Jain offered an ordinary way to see the change. Fly Bengaluru to Patna or Varanasi and consider who is sitting beside you – a skilled professional going home, who a generation ago would have taken the train, and who now calculates that two lost days cost more than the airfare. That passenger tells you something the GDP series does not.
What it changes: if you hold gold or dollar assets primarily as a rupee-depreciation hedge, the thesis behind that position is weaker than you think.
2. A strong India does not make every Indian stock cheap
This is where optimism meets arithmetic, and it is the section most likely to cost you money if you skip it.
As of 31 July 2026, the NSE index factsheets showed:
| Index | Price-to-earnings | 5-year total-return CAGR |
|---|---|---|
| Nifty 50 | 20.78 | 10.41% |
| Nifty Midcap 150 | 30.41 | 17.93% |
| Nifty Smallcap 250 | 34.25 | 15.28% |
The comparison is imperfect – the indices hold different industries with different capital structures – but the gap is too large to wave away. Midcaps trade at roughly a 46 per cent P/E premium to the Nifty 50; small caps at approximately 65 per cent.
In plain language: investors are paying substantially more for every rupee of earnings from smaller companies. That does not make every small cap expensive. It does mean smaller companies must deliver materially stronger growth simply to justify today’s price.
Japan is the standing warning. In the late 1980s Japan looked unstoppable – dominant in automobiles, electronics, banking and manufacturing, buying trophy assets worldwide. On 29 December 1989 the Nikkei 225 closed at 38,915.87. The companies did not vanish and Japan did not stop being an advanced economy. But investors had paid prices that already assumed decades of perfection. The index did not surpass that close until 22 February 2024, when it finished at 39,098.68 – more than thirty-four years later. Dividends improved the real experience; the lesson survives anyway.
Economic success and investment success are not the same thing. Price is what connects them.
3. There is no everything-boom coming
India before 1990 was an economy of shortages – Jain asked the room how long it took to get a telephone connection or a scooter, and noted that anyone under thirty would have no way of answering. Years, sometimes the better part of a decade. Liberalisation released the constraint; capacity was built through the 2000s; by the mid-2010s the shortages were substantially gone.
Layer on the composition shift. India is now roughly seventy per cent services, and services are structurally less capital-hungry. A bank or an IT firm does not spend what a steel plant spends.
This is the distinction on which Buffett rebuilt his method. Berkshire Hathaway began as a New England textile manufacturer, and he has described buying it as among the worst decisions of his career – not because the mills lost money every year, but because they consumed capital continuously just to stand still. Every rupee retained went into equipment that produced no durable advantage, because competitors installed the same equipment. The rule he drew: the best business earns high returns on capital and needs little of it; the worst needs enormous capital and earns ordinary returns. Capital intensity is not a sign of ambition. It is usually a tax.
Hold that next to Jain’s observation that the textile leaders of the early Sensex have vanished. Same industry, two continents, same lesson.
The next capex cycle, then, is likely to be selective rather than broad – electronics and components, transmission and distribution, battery storage, renewable integration, data centres, defence, specialised engineering.
And the progress is real: India’s Production Linked Incentive schemes had attracted more than ₹2.40 lakh crore of investment and generated over 14.15 lakh direct and indirect jobs by 31 March 2026.
But a genuine economic trend can still be an overpriced investment theme. “India will manufacture more” does not mean every defence, railway, power or capital-goods share delivers a good return from today’s price. A new factory can be excellent for India and a poor investment for the shareholder who overpaid for the company building it.
India has the receipt. In January 2008, infrastructure, real estate, capital goods and power were the market’s favourites and investors paid extraordinary prices for exposure to the growth story. Per the RBI’s 2008-09 Annual Report, the Sensex fell 60.9 per cent from its January 2008 peak to its March 2009 low, with mid and small caps worse. ₹1 lakh became roughly ₹39,000. The index recovered. Several of the fashionable infrastructure and real-estate names never did — the ones carrying too much debt took permanent damage.
Crises create bargains. Quality determines whether the bargain survives.
4. Lower inflation means lower returns – and nobody wants to hear it
This is the most important claim in the conversation and the one most likely to be ignored, because it sounds technical and is actually about your money.
Indian investors anchor on the nominal returns of earlier decades. Those decades also carried inflation of nine, ten, twelve per cent in an economy short of everything. As licensing went and competition intensified, inflation moved structurally lower. Equity returns track nominal GDP growth – so lower inflation means lower nominal growth, lower nominal earnings growth, lower nominal index returns. Jain expects twelve to fourteen per cent earnings growth ahead, and argues expectations should be explicitly rebased downward.
This is why any honest projection today uses ten or twelve per cent rather than the fifteen-plus that Indian investors quietly assume. The lower number is not pessimism. It is the arithmetic of a three per cent core inflation economy.
Buffett gave this speech, and it made him unpopular too. In July 1999, at Sun Valley, in front of a room of technology executives at the height of the boom, he argued that returns over the following seventeen years would look nothing like the seventeen just past. His reasoning was mechanical: the prior run had been powered by collapsing interest rates and expanding corporate profitability, and neither could repeat from those levels. He suggested something near six per cent rather than the mid-teens. He was ridiculed for months, and then the market obliged. Two decades earlier, in a 1977 Fortune essay, he had made the mirror argument – that equities behave like bonds with a coupon set by corporate return on equity, which is why inflation punishes shareholders more than they expect. Both say the same thing from opposite ends: the return environment is set by conditions, not by entitlement.
Check the index arithmetic. The Sensex was set at a base of 100 for 1978-79. It trades near 78,000 – roughly 780 times, before a single rupee of dividends. Add dividends reinvested and the Sensex Total Return Index sits around 122,000, or roughly 1,220 times, having peaked near 134,600.
Nearly forty per cent of the total outcome, across that span, is dividends – the least glamorous component, the one nobody discusses. And the index carried this while its constituents died. The businesses failed; the number compounded anyway. An index is not a museum. It does not preserve old champions out of nostalgia – weaker businesses leave and stronger ones enter, which is why an ordinary index investor does not need to know today which company will dominate Indian banking in 2040.
Which makes Bogle’s arithmetic urgent rather than merely virtuous. His argument was never that fund managers are stupid; it was that gross return minus cost equals net return, as subtraction rather than opinion. In a fifteen per cent world, a 1.5 per cent fee takes a tenth of your return. In a low-teens world it takes materially more, and it compounds against you for as long as your capital compounds for you. Lower expected returns do not shrink the cost problem. They make cost the largest controllable variable you have left.
karmaṇyevādhikāraste mā phaleṣu kadācana — Your claim is on the action alone, never on its fruits. (Bhagavad Gita 2.47)
Usually read as consolation. Better read as a warning about anchoring: an investor who feels entitled to fifteen per cent will reach for risk to manufacture it when the environment stops supplying it. Your adhikāra extends to contribution rate, cost, allocation and holding period. The fruit is set by the economy.
5. The small-cap run was a flow event, not an earnings event
Jain walked the room through the arithmetic rather than asserting it. Set both large caps and small caps at 100 before COVID. Large caps fell hard in the crash; small caps fell far harder, because when large caps are down thirty per cent nobody wants to own a small company. From those lows, large caps recovered to roughly three times the pre-COVID level. Small caps went to roughly seven.
Measured from the bottom, small caps look to possess magical powers. Measured from 100, both merely recovered and advanced. Part of the spectacular return exists only because there was first a spectacular collapse – and the dangerous move is to treat a rebound from crisis as a normal rate of return.
The buyer data is more dramatic than the version he gave the room. India had 4.1 crore demat accounts in March 2020, and over 21 crore by late 2025. A five-fold expansion of the participating public in six years, arriving in the segment least able to absorb it, mostly after the recovery had begun.
America ran this experiment in 1972. The Nifty Fifty were fifty large, genuinely excellent American companies – Disney, McDonald’s, Xerox, Avon, Polaroid – that institutions decided were “one-decision” stocks: buy at any price, never sell, because quality would bail out the entry point. At end-1972 Xerox traded near 49 times earnings, Avon near 65, Polaroid near 91. From subsequent highs to 1974 lows the three fell approximately 71, 86 and 91 per cent. The businesses were real; the profits were real; the quality was often excellent. Polaroid filed for bankruptcy in 2001.
Being right about the company and wrong about the price is a complete description of how good investors lose money.
India ran it in 1992. Between April 1991 and April 1992 the Sensex rose something like 270 per cent on a bull market running partly on money diverted from the banking system. When the Harshad Mehta scam broke, roughly half the gain went back – and the retail investors who arrived at the end paid for it.
Jain also punctures the category logic. Perhaps a hundred large caps exist against two thousand small caps – a range of outcomes so wide that extrapolating the winners to the category is meaningless. His rule ignores market capitalisation entirely: a pencil manufacturer will always be small because the industry is small, however excellent the business; the tenth-best car company will be large because the industry is large. Buy the strongest company in whatever industry you are in.
His timing rule is the one nobody follows. Buy small caps after a crisis. He performs the objection himself: tell someone that when they are down forty per cent and they will tell you that you have lost your mind – they do not want more wealth, they want their hundred back.
The Samudra Manthan is the exact shape of this problem. Devas and asuras churn the ocean for amrita, and what surfaces first is not nectar but halahala, a poison potent enough to end the world. Only after it is drunk and held – Shiva taking it in his throat, neither swallowing nor spitting it out – does the ocean give up its treasures, Lakshmi among them. The sequence is not incidental. The nectar is available only to those still present after the poison.
Buffett compressed the instruction into six words: be fearful when others are greedy, and the reverse. Quoted constantly, followed almost never, because the reversal is not an intellectual difficulty but an emotional one.
Templeton actually did it. In 1939, with Europe going to war and markets in despair, he borrowed money and bought $100 of every stock trading below a dollar on the New York exchanges – 104 companies, thirty-four already in bankruptcy. He held four years. Only four became worthless.
Munger supplied the missing half: the money is made in the waiting, not the buying and selling. Between crises there is nothing to do, and doing nothing is the part most investors cannot execute.
What it changes: the excess return from small caps has largely been collected, and it was compensation for beta rather than evidence of skill. Bring an overweight back toward strategic weight and hold the capacity to buy the next drawdown. Keep the core large; make the smaller-company allocation earn its place.
6. Allocation before selection – with one correction
Investors spend most of their attention on which share. Jain’s claim is that the question barely matters next to how much in equity, debt and gold, and how much volatility can you actually tolerate.
But the famous statistic needs fixing, and it is worth fixing publicly. The line that asset allocation determines “ninety per cent of returns” is a misquote of Brinson, Hood and Beebower, whose study found that investment policy explained about 95.6 per cent of the variation in portfolio returns over time. That is a claim about variance, not about wealth – it does not establish that 95.6 per cent of any investor’s money came from allocation.
The practical lesson survives the correction intact: for most investors, the broad mix of assets, costs, discipline and time in the market matters more than endlessly swapping one stock for another. But an argument this important deserves to rest on what the research actually said.
7. Indian IT has bounded downside
The most elegant argument of the evening works by conceding the bear case entirely.
Jain does not defend IT’s growth prospects against the AI thesis. He grants the worst case: assume terminal value is zero, assume these businesses eventually become worthless. Then note that at low-teens earnings multiples with payout ratios of eighty to ninety per cent, an investor recovers a substantial portion of capital as dividends before the story ends. The sector’s index weight is high single digits, so even a halving costs the index a few per cent.
This is not a debating trick; it is the oldest formal idea in valuation. John Burr Williams, writing in 1938, defined the value of any asset as the cash it will distribute over its life, discounted back. Everything since is elaboration. Jain has simply run Williams’ formula with terminal value deleted and observed that the answer is still positive. A business paying out most of its earnings at a low multiple does not need growth to be worth owning; it needs only to survive long enough to pay.
vāsāṁsi jīrṇāni yathā vihāya navāni gṛhṇāti naro’parāṇi – As a person sets aside worn-out clothes and takes up new ones… (Bhagavad Gita 2.22)
Krishna is describing the soul and the body. It applies without much strain to an index and its constituents.
And the origin story is a lesson in itself. Infosys went public in June 1993 at ₹95 a share – and the issue was undersubscribed. Retail India did not want it. Morgan Stanley stepped in and took thirteen per cent of the equity to rescue the offering. The stock listed at ₹145.
The company that came to define Indian equity wealth creation could not fill its own IPO. It began as the thing nobody wanted, and is now the thing nobody wants again. That symmetry is not an argument for buying. It is an argument for noticing that consensus was wrong at both ends.
8. Gold – where the facts have moved against his framing
His baseline is conventional: gold is insurance, cap it around a tenth of a portfolio, equities have outperformed it over the long run.
His non-obvious point was that a meaningful part of the domestic gold price rests on import customs duty, which a government can change – and he suggested the duty might eventually come down, removing a prop under the price.
The opposite happened, and readers should know it. On 13 May 2026 the Finance Ministry raised the effective customs duty on gold and silver from 6 per cent to 15 per cent, taking basic customs duty from 5 to 10 and the agriculture infrastructure cess from 1 to 5. This reversed the Budget 2024 cut that had taken the duty down from 15 to 6. Officials framed it as a balance-of-payments measure.
The context explains it. The 2024 cut helped trigger a 24 per cent surge in gold imports to a record $71.98 billion in FY2025-26 – close to 9 per cent of India’s entire import bill, at 721 tonnes. Gold crossed ₹1,56,800 per 10 grams. The Prime Minister publicly asked citizens to curb bullion buying for a year.
So Jain’s mechanism was right. The repricing risk from a future duty cut is bigger than he implied. A meaningful slice of what you pay for gold in India is a tax that a future budget can remove overnight, as one did in 2024. It also strains his claim that the current account is unambiguously well behaved: FY26 saw a CAD near $42 billion, with bullion a visible contributor and the government intervening specifically to defend the rupee.
And gold is not automatically safe at any price. In January 1980, amid high inflation, the Soviet invasion of Afghanistan and general geopolitical anxiety, gold briefly reached $850 an ounce. Fear subsided, rates rose, and it ended the 1980s just above $400. It did not set a new nominal record until January 2008 – nearly twenty-eight years later, and longer still in inflation-adjusted terms.
Bought during extreme excitement, the safe asset produced a generation-long wait. That is the same lesson Japan taught with equities, delivered by the asset people buy because they fear equities.
Buffett’s objection is different from Jain’s and sharpens it. His argument is about category, not price. Gold is not productive: it builds nothing, hires no one, generates no cash. Its owner relies entirely on someone paying more later. Against the same money in farmland or operating businesses – assets producing output every year, still producing in a century – the metal wins only if fear compounds faster than commerce. Over long enough periods, it has not. Jain arrives at the same place from the national accounts: an economy converting savings into locked metal is taxing its own growth.
Second, the riddle he posed and deliberately left unsolved. When equities fall thirty per cent, investors freeze. When gold falls thirty per cent, the same investor buys more, confidently. How can one person behave so differently in identical situations?
The Gita answers it in four words:
samatvaṁ yoga ucyate – Equanimity is what yoga means. (Bhagavad Gita 2.48)
The investor in the riddle has equanimity. They simply apply it to one asset and not the other, because they hold gold with a fifty-year mind and equities with a fifty-day one. A grandmother buying gold does not check its three-month chart; she expects it to reach her granddaughter. The asset did not change. The time horizon in the holder’s head did.
Jain’s instruction follows: think about good equities with the patience Indian families already bring to gold.
His harder point is civilisational. Our tradition already distinguishes two relationships to wealth. Kubera guards a hoard. Lakshmi is chanchala – she moves, and is worshipped as flow rather than stock. A nation storing its savings in Kubera’s vault is not the same as a nation putting them to work. At $72 billion a year, this is not a metaphor.
What he says is not a risk
Worth flagging, because it inverts a common worry. Inflation and rupee depreciation are not equity risks, he argues. Equity returns track nominal growth, so inflation passes through. These are bond risks – the holder of a fixed coupon is the one whose purchasing power erodes.
The risks he does name are external: a significant rise in US interest rates; global fiscal deficits pushing rates up; and oil at $150 on renewed conflict.
There is history behind the first. In late 1980 and early 1981, Paul Volcker allowed the federal funds rate to approach 20 per cent to break inflation; the US entered a severe recession, unemployment climbed, and asset valuations were forced to adjust. Rates then fell for four decades, bottoming near zero in 2020. Every asset class on earth was priced against that tailwind. It has stopped. When safe government bonds pay well, investors become less willing to pay extraordinary prices for uncertain future profits — which is the entire mechanism by which US rates reach into an Indian portfolio.
On global diversification Jain is blunt. If you want currency and country diversification but cannot genuinely analyse foreign equity markets, buy US Treasuries and take the yield. He applies the test to himself, avoiding high-technology businesses in India on the same grounds.
Berkshire operationalised this as furniture. Buffett and Munger sort opportunities into three piles: in, out, and too hard. The third is the innovation. Most investors have no mechanism for declaring something beyond their competence without also declaring it a bad investment – so they either buy what they do not understand or invent reasons to dismiss it. A formal “too hard” pile lets you decline without judging, and the discipline is that the pile is allowed to be enormous.
śreyānsvadharmo viguṇaḥ paradharmātsvanuṣṭhitāt – Better one’s own duty imperfectly done than another’s performed well. (Bhagavad Gita 3.35, repeated at 18.47)
Circle of competence is svadharma with a Chicago accent. The verse does not promise that your own dharma produces better outcomes. It says that operating outside it is the more dangerous error.
The most quotable line of the evening was also the truest: good investing is boring, and whatever is currently popular will disappoint. Popularity attracts capital, capital raises price, and an expensive asset eventually underwhelms.
Templeton said it more expensively. He called this time it’s different the four most costly words in the English language – not because circumstances never change, but because the phrase is almost always deployed to justify a price rather than to describe a fact.
The Gita classifies pleasures by what they do over time. The rajasic kind – from the contact of the senses with their objects – is nectar at first and poison in the end. The sattvic kind reverses the order: poison at the beginning, nectar later, born of the clarity that comes from sitting with your own reasoning (18.37–38).
That is a fair description of every rebalancing decision worth making. The thematic fund that has tripled is nectar now. The trade that moves money out of it tastes like poison today.
Which is the uncomfortable corollary of the whole evening: if a portfolio feels exciting right now, that is information.
Market data and policy details verified against public sources as of August 2026; figures cited by the speaker have been checked and, where they had moved, updated in the text. Index valuations are from NSE factsheets dated 31 July 2026. Positions attributed to other investors are paraphrased from their published writing and public remarks. Sanskrit renderings are the author’s own. Nothing in this article constitutes investment advice.
Karnvir Mundrey is the Editor of TheFutureOfPR.com. Reach out at tfofpr@gmail.com or at +918296303806.
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