InCred Money CEO Nitin Agarwal's Budget 2026 Vision: Fiscal Discipline, Private Investment & Economic Growth

Nitin Agarwal, CEO of Mutual Funds at InCred Money, asserts that the upcoming Budget 2026 must strike a delicate balance between encouraging private sector investment and upholding strict fiscal discipline. In an exclusive interview, he emphasized that the government should adhere to current fiscal deficit targets, even if this necessitates containing revenue expenditure growth. Agarwal's insights extend beyond budget expectations to cover critical trends in foreign and domestic institutional investments, mutual fund strategies, and the evolving role of gold as an asset class.

Budget 2026 Expectations: A Three-Pronged Approach for Economic Resilience

With India's economy demonstrating robust resilience by achieving 8% growth in the first half of FY26, Agarwal outlines a balanced approach for Budget 2026, focusing on three key areas:

Sustained Capital Expenditure: The government allocated nearly ₹11 lakh crore for direct capital expenditure in FY26, representing 3.1% of GDP. Maintaining this level is crucial to crowd in private investment, particularly in infrastructure sectors, and support the transition from a $4 trillion to a $5 trillion economy.
Consumption Stimulus Through Targeted Tax Relief: Given moderate consumption growth, slight relaxations in income tax slabs are expected. This follows the initial positive effects of GST rate reductions and should act as a key catalyst to revive consumption in the economy.
Export Competitiveness Measures: Providing additional incentives and benefits for exports may improve overall economic performance and the balance of trade amid volatile geopolitical conditions, ensuring India remains competitive on the global stage.

FII-DII Divergence: A Historic Shift in Market Ownership

The year 2025 witnessed a significant divergence, with Domestic Institutional Investors (DIIs) investing over ₹7 trillion in Indian stocks while Foreign Portfolio Investors (FPIs) pulled out over ₹2 trillion from the equity segment. This shift has led to FII ownership shrinking to a multi-year low, with DII holdings first surpassing FIIs in the March 2025 quarter.

Key factors driving this trend include:

FII Outflows: Global investors were attracted to US markets driven by AI investments, elevated US interest rates making emerging markets less appealing, and concerns about India's premium valuations.
DII Inflows: Robust Systematic Investment Plan (SIP) contributions, with monthly inflows reaching approximately ₹30,000 crore, along with growing insurance and pension fund participation, sustained momentum despite volatile global conditions.

Notably, FIIs poured $1.2 billion into domestic IPOs in October 2025, the second-highest monthly amount that year, indicating they are not bearish on India's growth story but are being valuation-selective.

Mutual Fund Strategies: Adapting to Macro Trends and Global Cues

Mutual fund strategies are evolving in response to current macro trends, with a significant shift toward diversified and defensive allocations:

Multi-Asset Allocation: Funds balancing equity, debt, and other assets delivered superior performance in 2025, benefiting from the rally in precious metals. Dynamic gold allocation is increasingly used as a natural hedge against equity volatility, inflation, or currency depreciation.
Debt Fund Positioning: Shorter-duration debt funds have been a strong bet in anticipation of a rate-cut cycle.
Atmanirbhar Bharat Themes: Investments are focusing on India-specific stories as the world moves toward protectionism.

Guidance for Retail Investors: Navigating Changing Conditions

Retail investors should adopt a disciplined, multi-faceted approach to navigate evolving mutual fund regulations and macro conditions:

Maintain SIP Discipline: With monthly contributions nearing ₹30,000 crore, SIPs reduce market timing risk and leverage rupee-cost averaging during volatility.
Optimise Costs Under New Regulations: The SEBI (Mutual Funds) Regulations, 2026, separated statutory levies from the total expense ratio and reduced brokerage caps. Investors should review holdings and consider lower-cost options.
Embrace Diversification: A multi-asset and multi-strategy approach is recommended to navigate market cycles effectively.
Focus on Risk-Adjusted Returns: Prioritize consistent performance over headline returns, as disciplined investing has delivered competitive outcomes even when small-cap and mid-cap averages lagged.

The Rise of Quantitative Strategies: A Maturing Market

Quantitative strategies are experiencing significant growth in India, marking a fundamental maturation of the capital markets. Assets under management in smart beta funds have grown nearly 30 times in the last five years, indicating India's inflexion point in quant investing. While still nascent, quant strategies have proven to add significant alpha to portfolios. The launch of specialised investment funds and a plethora of smart beta and factor-based indices by index providers offers investors richer options for portfolio construction, especially as active managers' ability to generate alpha in large-cap segments has declined.

Gold's Evolution: From Defensive Hedge to Strategic Asset Class

Gold's role has evolved from a purely defensive hedge to a more dynamic strategic asset class, though it retains distinct characteristics from equities. In 2025, gold was one of the best-performing asset classes, driven by inflation concerns and ongoing purchases by global central banks. Official sector purchases have driven gold's proportion of global reserves above the euro for the first time in decades, creating a structural demand floor. Professional managers now actively adjust gold exposure based on market conditions, using it as a natural hedge. Agarwal suggests that precious metals should be considered as a fixed allocation in portfolios rather than a discretionary bet.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. Investors are advised to consult certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.