Asit Bhandarkar, Senior Fund Manager at JM Financial AMC, highlights that foreign institutional investors (FIIs) may consider returning to Indian markets if the rupee stabilizes and the government provides tax relief for foreign investments in debt instruments. While recent reports of a 1-1.5% market uptick due to potential tax relief are encouraging, Bhandarkar warns that currency volatility remains a significant barrier for long-term investors. He notes that the Indian government aims to manage the rupee's volatility without dictating its value, which is crucial for attracting FIIs.

In the banking sector, despite facing treasury losses, credit growth is robust at over 16%, and asset quality remains strong. Bhandarkar believes that current valuations do not reflect the underlying earnings potential, especially in smaller private banks and public sector units (PSUs).

Looking ahead, Bhandarkar acknowledges that geopolitical risks, particularly from rising fuel prices, may impact demand for mass consumption goods in the short term. However, he emphasizes that markets tend to look beyond immediate disruptions, similar to the patterns observed during the COVID-19 pandemic. For investors with an 18-to-24-month horizon, the current market conditions present opportunities for stock picking, as many stocks have seen significant declines from their peaks. He suggests that while the macro environment may worsen before improving, a recovery in FY28 is a plausible scenario.