Rupee stability alone may not bring foreign investors back to India: Ambit's Dhiraj Agarwal

The Reserve Bank of India's (RBI) latest policy measures may help stabilise the rupee and reduce panic in financial markets, but they are unlikely to trigger a sustained return of foreign investor flows unless growth and earnings prospects improve, according to Dhiraj Agarwal, Managing Director of Ambit Investment Managers, which managed assets worth ₹2,117.37 crore as of April 30, 2026.

Agarwal said the policy's biggest impact was on currency management, with the RBI taking steps to arrest the rupee's decline. He expects this to help moderate foreign investor outflows, though he remains cautious on the medium-term outlook due to slowing growth, rising inflation risks and global uncertainties.

"I call this more of a relief at this point of time, more than a bazooka," Agarwal said. He added that the measures aimed at supporting the rupee were the most significant part of the policy announcement.

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The rupee strengthened following the policy decision, while bond yields softened, reflecting positive market reaction to the RBI's measures. According to Agarwal, stabilising the currency was an urgent priority because it had become a key concern for foreign investors evaluating India.

While the RBI and government also announced measures related to foreign portfolio investors (FPIs), non-resident Indians and overseas citizens of India, Agarwal believes these steps alone will not be enough to bring foreign capital back into Indian equities.

"The problem in the Indian markets have been outflows, and not the scarcity of limit for the additional inflows," he said.

According to Agarwal, foreign investors are likely to return only when corporate earnings growth improves or when global enthusiasm around artificial intelligence-driven investments begins to moderate.

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He expects the pace of foreign selling to slow if the rupee remains stable or appreciates further, which would itself be a positive development for markets. However, he does not see a strong case yet for a significant revival in FII inflows.

Agarwal also highlighted concerns around the RBI's revised macroeconomic projections. He noted that the central bank lowered its gross domestic product (GDP) growth forecast while raising its inflation outlook, alongside warnings about higher crude oil prices and downside risks to growth.

"The medium-term picture is still not very rosy, so we need to be a little cautious," he said.

For the full interview, watch the accompanying video

Agarwal does not share the market's bullish view on financial stocks. He argued that banks and financial institutions are closely tied to the broader economy and could face pressure if growth slows and inflation remains elevated.

He added that expectations of earlier rate hikes could also create challenges for the sector over the next 12 months, even if short-term gains remain possible following the policy announcement.

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