Nothing scared her, because a rare genetic condition had destroyed both sides of her amygdala, the part of the brain that processes fear and pushes you to avoid danger.

But the rest of us still have that part intact, and it doesn’t only fire for knives and haunted houses. It fires for anything tedious, boring, or vaguely anxiety-inducing too, a tax form, an insurance renewal, updating a nomination on a mutual fund. The amygdala flags the task as a threat, using much of the same circuitry S.M. was missing, and pushes the brain toward avoidance instead of action. 

Here’s why that matters even more as you get wealthier. Building wealth doesn’t just give you more money. It also gives you more things to manage: more accounts, more paperwork, and more decisions to make. And all of this comes at a time when your time is becoming more valuable. So the very thing wealth is supposed to make easier can sometimes get harder to manage. You may put off looking at an investment or making a financial decision simply because your brain tends to avoid things that feel complicated, unfamiliar, or demanding.

This newsletter looks at what that avoidance can cost you, what science tells us about the link between wealth and happiness, and how to find the right balance between the two.

In this edition

1. The happiness ranking of everyday life                   
2. How to use money to buy back the time you keep giving away
3. What should you spend more money on?
4. Building your happiness allocation

There’s a number in the research on happiness that I find more useful than almost any debate about whether money makes people happy : -2.45. 

Behavioural data tracking mood against daily activities shows that financial, household, and administrative tasks carry a happiness coefficient of -2.45. That puts admin right alongside being sick in bed, at the very bottom of daily human experience, worse than commuting, worse than most chores anyone complains about.

Unlike a strained relationship or a health scare, which no amount of money can touch, admin is one of the few things on the bad end of that list that money actually can remove. And yet it’s usually the thing that expands, not shrinks, as a person does better financially. Think about what sits inside that category. Paying bills. Sorting paperwork. Coordinating household help. Chasing a plumber. Booking appointments. Comparing vendors. Filing documents. Dealing with the small things that somehow multiply when you’re not looking.

None of these activities are catastrophic and that’s exactly what makes them dangerous. They take hundreds of hours a year and give almost nothing back. 

A Swedish economist, Staffan Linder saw a version of this problem more than fifty years ago and called it the harried leisure class. His argument was simple: as your income rises, your time becomes more valuable. And once your time feels valuable, you start trying to squeeze more out of every minute. Even leisure becomes something to optimise. The swimming pool you bought to relax becomes something you have to maintain. The farmhouse becomes another property to manage. The holiday becomes 18 WhatsApp groups, three spreadsheets and a calendar.

You have more money. But somehow, less life. And this is where I think wealth creation gets misunderstood. The point of becoming wealthier isn’t just to afford better things. It’s to stop spending your best hours on things that make your life worse.

Researchers who have tracked people’s activities and moods repeatedly find that some of the highest-rated parts of a day are remarkably ordinary: spending time with people you love, exercising, being outdoors, intimacy, engaging experiences. 

And near the bottom? Work, Admin, Commuting, and Waiting. Yet these are exactly the things many successful people continue to do themselves. That doesn’t make sense. If you have enough money to pay someone ₹2,000 to solve a problem that you would otherwise spend two hours solving yourself, the question isn’t whether you can afford ₹2,000. But whether your two hours are worth more to you than ₹2,000.

How to use money to buy back the time you keep giving away

This is where money can do something genuinely useful. It can make taxing parts of your life disappear. A cook doesn’t just make dinner. They remove grocery shopping, chopping, cleaning and planning from your week. A driver doesn’t just move you from A to B. They turn a commute into an hour where you can read, call your parents, stare out of the window or simply do nothing. An assistant doesn’t just book appointments. They remove the dozens of tiny decisions that sit behind them. A good CA doesn’t just file your taxes. They remove the mental load of remembering what needs to be done. 

All this has become increasingly relevant in urban India.  Groceries arrive in minutes, a plumber comes to your door, and a cab is a few taps away. Quick commerce alone is now a multi-billion-dollar industry. Trading money for time has become part of everyday life. 

And that’s actually a good thing. A Harvard study of 6,000+ people across several countries, including millionaires, found that people who spend money to save time tend to be more satisfied with their lives, across income levels. This is why I think we should stop looking at these expenses as lifestyle inflation. Sometimes they’re not. Sometimes they’re time investments.

Do a simple test: Does this purchase give me something? Or Does this purchase take something away. The second question is often more valuable. If something consistently drains you and money can remove it, remove it.

But there’s a catch. 

Buying back time doesn’t automatically make you happier. Because we are very good at filling empty space, a concept called time confetti. The 45 minutes you save by skipping the supermarket rarely comes back as 45 uninterrupted minutes. It gets scattered across Instagram, messages and email until it’s gone.

Then there’s the autonomy paradox: tools that give us more control over our time can also make us feel obliged to fill it with more work. You save an hour, only to find another hour of work to put in its place. You haven’t really bought back time. You’ve just created capacity for more work. So there’s a second rule to follow: Never buy back time without deciding what you’re buying it back for.

If the answer is “I’ll get more work done”, that’s fine if that’s genuinely what you want. But don’t tell yourself you’re spending money to improve your life when you’re really spending it to fit another task into the day.

Once you’ve removed the things that make your life worse, there’s a second job for money: create more of what makes your life better. This is where spending gets interesting.

A friend of mine got his first big ESOP payout after his startup was acquired last year. Within a week, most of it had gone into mutual funds and retirement funds. But months later, the thing he still talked about wasn’t any of that. It was flying his three closest college friends to Goa on his own dime, no occasion, no ask, just because he finally could. That trip cost him money. But it bought something he couldn’t have bought in quite the same way before: a memory that four people still talk about.

And there’s a genuine physiological reward wired into helping other people or giving to someone else, and it isn’t a small or occasional effect. Helping or giving, when it’s freely chosen, activates the brain’s reward system much like receiving money yourself. Regular giving is also linked to better mood and health, with the effects lasting far longer than the quick high of buying something for yourself aka helper’s high. 

Spending and happiness points in a similar direction: money tends to work better when it buys time, experiences, relationships and generosity, rather than simply more stuff.

We spend a lot of time thinking about the allocation of our investment portfolio. How much in equity? How much in debt? How many alternatives? How much liquidity? It might be worth doing the same exercise with your life. Take everything that occupies your time and put it through two questions: Does it make my life better or worse? Can money change it?

That gives you four boxes.

The top-left box is where I think wealthy people often leave the most money on the table. They have the ability to remove things that make their lives worse, but they keep doing them because they’re used to doing them. They’ll spend ₹2 crore upgrading a house and hesitate to spend ₹50,000 a year on something that would give them back 200 hours.

That’s backwards. The return on money isn’t always a thing you can point to. Sometimes it’s an hour that never gets wasted.

And that’s probably the most useful way to think about wealth and happiness. Don’t ask yourself: “What can I buy now that I couldn’t afford before?” Ask: “What part of my life can I stop doing now that I couldn’t stop doing before?” Then ask: “What do I want more of now that I finally have the money to buy it?”

That’s what wealth is for. 

Disclaimer:The information provided herein is intended solely for educational and informational purposes. The information contained in this document is for general purposes only and is not a complete disclosure of every material fact, term or condition. In the preparation of this document, Dezerv has used publicly available information and other sources believed to be reliable. The information provided in this document has not been independently verified by Dezerv and are subject to change.

One, a die-hard Delhi loyalist, went on about the winters, the food, the sheer scale of the city, and how everything important in the country eventually passes through it. Another, who’s spent her career in Mumbai, talked about the sea, the energy, the hustle, and how every other Indian city feels slower by comparison. The third, a Bengaluru transplant like me, had his own case: the weather, the pubs, the tech money, and the feeling that the city still feels young and full of possibility.

I grew up in Mumbai and moved to Bengaluru a few years ago, one of several cities Dezerv is based in, because that’s where I chose to lead from. It wasn’t necessarily the weather that brought me here. It was the work, the talent, and the energy of building something new.

The thing about “which city is better” debates is that nobody is really wrong. Each of my friends was optimising for something real: the Delhi fan for scale and centrality, the Mumbai friend for pace and ambition, and the Bengaluru guy for opportunity and youthful energy. They were simply choosing differently.

But personal preference only takes you so far. To know how well a city actually works, you need a different lens. Every year, the Economist Intelligence Unit ranks 173 cities on healthcare, education, infrastructure, stability and everyday life. No Indian city comes close to the top: Delhi ranks 120th, with Mumbai, Chennai and Bengaluru trailing behind. Given the wealth, talent and ambition concentrated in these cities, that deserves a closer look.

So this week, we’re asking a different question: not which city is best to build a career or wealth in, but which is best to live in, once you strip away reputation, opportunity, and loyalty, and just look at the numbers.

In this edition:

• What actually makes a city “liveable” 
• Beyond jobs and salaries: India’s most liveable cities
• What this means for your next big location decision
• How a few Indian cities and villages are already cracking it

What actually makes a city “liveable”

Strip away the GDP numbers and skyline photographs, and every city is judged on five things:  Stability (25%), Culture & Environment (25%), Healthcare (20%), Infrastructure (20%), and Education (10%). Together, these cover everything from safety and air quality to healthcare, transport, housing, and schools. Each is weighted differently, and together they produce a single score out of 100.

Copenhagen leads the 2026 index with 98.2, posting perfect 100s in education, infrastructure, and stability.

Now, the real difference between Copenhagen and Delhi isn’t money. It’s who is responsible for getting things done. Copenhagen has one empowered local authority overseeing transport, land use and infrastructure. That makes long-term projects, like its 400 km network of protected cycling lanes, easier to plan and actually complete.

Delhi has no equivalent authority. Roads, water, transport and planning are split across the MCD, NDMC, DDA, PWD, Delhi Jal Board and Delhi Traffic Police, with different agencies reporting to the Centre or the Delhi government. No one owns the outcome. 

Yet Delhi scores 58.9 for infrastructure, largely because of the Metro, which worked because it was built through a single, insulated authority. Mumbai scores just 51.8 despite one of the world’s busiest urban rail systems, because its railways operate largely separately from the city’s roads, buses and housing authorities. Improving one system doesn’t necessarily improve the others.

Healthcare runs into the same problem. Copenhagen, Zurich and Geneva treat it as a universal system, with broad access and consistent standards. Delhi and Mumbai both score just 41.7. Both have some of India’s best private hospitals, but the EIU measures whether ordinary people can access and afford care, not whether excellent care exists for those who can pay. That makes this less a hospital problem than a system problem.

Culture & Environment is where India’s biggest cities struggle most. Delhi scores 35.4 and Mumbai 33.3, far below the global average. That’s striking for cities celebrated for their food, festivals, architecture and diversity. But the EIU’s environment score comes down to basics: air quality, waste and drainage. In Delhi, courts repeatedly step in over pollution and flooding because no single civic authority owns the problem.

Education is where both cities fare better. Delhi scores 66.7 and Mumbai 58.3, their strongest scores apart from stability. That’s partly because education has fewer overlapping authorities: state departments and school boards largely run the system.

The contrast is telling: when responsibility is clear, cities perform better; when it is split across agencies, performance suffers.

Beyond jobs and salaries: India’s most liveable cities

Every year, a Bengaluru techie complains about traffic, a Delhi executive about the air, and a Mumbai banker about rent. Yet all three stay. That loyalty says something: people put up with expensive, difficult cities because that’s where the money and opportunity are.

But step outside that emotional pull, and 23 Indian cities purely on the data, and a different set of winners emerges – cities largely absent from those group-chat rants. A cost-of-living versus quality-of-life map of 23 Indian cities makes the split clear, sorting them into four categories: Bad Value, Best Value, Premium Life, and Budget Living. And India’s biggest economic powerhouses cluster heavily in Bad Value.

It isn’t that these cities aren’t building. India has gotten genuinely good at infrastructure that gets ribbon-cuttings and headlines: metros, airports, expressways and digital payments, all at remarkable speed. It is far worse at the unglamorous, recurring work that rarely makes headlines: collecting trash, treating sewage, maintaining drains, keeping things clean after the cameras leave. The first is visible and politically rewarding. The second is invisible until it fails, and thankless even when it works.

Mumbai epitomises this divide. The city just opened the Aqua Line, an impressive metro extension that would be a point of pride in most global cities. Yet Mumbai is surrounded on three sides by water, with beaches lined with garbage and a coastline largely unusable because sewage and waste aren’t properly collected or treated. The same mismatch shows up in what residents pay versus what they get. Take property prices, for instance.

Mumbai’s Property Price-to-Income ratio, 30.1, is the highest of any city by a wide margin, nearly double Delhi’s and more than six times Hyderabad’s. It captures what the Cost of Living index misses: groceries and transport aren’t dramatically more expensive, but buying a home takes years of income that few other Indian cities demand.

Residents pay that premium for economic opportunity and improving transit. What they get back, a Pollution score of 83.1 and Traffic Commute score of 55.0, both among the worst here, is the daily cost of living in the city.

Delhi carries the same imbalance differently. Its Property Price-to-Income ratio of 16 is high but far below Mumbai’s, while its Purchasing Power is stronger than Kolkata’s and Jaipur’s. What drags it to the bottom is Pollution and Safety, both the worst in the country. Neither of those improves by building something new. They require the less glamorous work of controlling emissions, maintaining drainage and enforcing traffic rules, consistently.

Bengaluru is almost the inverse story. Its incomes are among the strongest in the country, proof that its economic engine works. But traffic and pollution are close to Delhi’s because civic investment hasn’t kept pace with its growth. The city grew faster than its roads, drainage and basic infrastructure could handle.

Hyderabad has one of the healthiest Property Price-to-Income ratios, partly because it hasn’t yet seen the population surge that overwhelmed Delhi and Mumbai. That’s an advantage today, but also a warning: many cities now in “Bad Value” once looked like this, before population outpaced infrastructure.

Coimbatore, Jaipur and Surat benefit from the same mathematics of scale. Smaller populations mean less pressure on traffic, waste and water systems, making it easier to stay clean and safe. Some are genuinely well run, but part of their advantage is simply having fewer people to serve.

What this means for your next big location decision

Everything in this newsletter has been building toward one question: given all of this, what should you actually do with it? The honest answer is that no single city is “the best.” The right one depends on what you’re optimising for right now, and that changes with age, family, career and how much wealth you’ve already built.

Here’s a simple framework to help you make that choice.

If your city doesn’t fit your current stage, that’s not automatically a problem. Just be clear about what you’re trading for it, and whether that trade still makes sense. This table covers only 13 cities, and there are many more worth comparing. If yours isn’t here, you can run the same comparison yourself in under a minute: search for your city’s Quality of Life page and compare it with another city here 

How a few Indian cities and villages are already cracking it

None of this means India needs to import someone else’s model of how a city should run. It already has working examples at home, many of them overlooked. Indore has been India’s cleanest city for eight straight years, not through a foreign template but through door-to-door waste collection, strict source segregation, and citizens who actually participate in the system rather than merely tolerating it.

Mawlynnong, in Meghalaya, has long been known as Asia’s cleanest village, sustained largely through community discipline rather than government enforcement. Punsari, in Gujarat, gave residents streetlights, CCTV, Wi-Fi and clean water years before many Indian towns, funded through local revenue rather than waiting for state or central grants.

The pattern across all three isn’t budget size. It’s that administration, funding and citizen behaviour reinforce each other instead of working against one another. The lesson is simple: better cities don’t always need more money. They need all three to work together, with discipline, consistency and citizens willing to play their part.

Disclaimer : The information provided herein is intended solely for educational and informational purposes. The information contained in this document is for general purposes only and is not a complete disclosure of every material fact, term or condition. In the preparation of this document, Dezerv has used publicly available information and other sources believed to be reliable. The information provided in this document has not been independently verified by Dezerv and are subject to change.

Fast forward to today, and the same country is the largest rice exporter on earth, over $11.5 billion worth a year, off roughly the same land, at nearly four times the output. It’s a remarkable transformation, but it rarely gets talked about.

That change matters beyond agriculture. A country that can feed itself has more stable food prices. Stable food prices help keep inflation down. And lower inflation, over time, gives the RBI more room to cut interest rates. Which brings us to where Indian money is headed next.

The RBI puts out a comprehensive annual report covering the economy, banks, savings, investments and markets. We already know the big parts of the India story: GDP is growing, UPI is booming and more money is moving into financial markets. So, in this week’s edition, I went through the report looking for what’s happening beyond those familiar stories, the changes that don’t get as much attention, but matter just as much.

Let’s begin.

A ₹2.2 lakh crore credit economy built on women’s collectives

Walk into a bank without collateral or a credit history, and getting a loan is difficult. A bank needs some reason to believe you’ll repay, and usually, that means having something it can take if you don’t.

For millions of rural women, that problem was solved in a much simpler way: they started lending to each other. Since the 1990s, small groups of people, mostly rural women, have been forming what are called Self-Help Groups. Around ten to fifteen women in a group save a small amount together every month and lend it to each other, informally, no paperwork most banks would recognise. 

Once a group proves it can save and repay reliably as a unit, banks start lending to the group directly, backed by nothing but that shared track record. It’s a version of an idea economists have studied for years, that when a bank can’t verify any one borrower’s honesty, a group that vouches for its own members, and stands to lose access for everyone if one person defaults, can end up more reliable than a stranger with a salary slip. Peer pressure turns out to be a decent substitute for collateral.

In 2006-07, banks lent these groups a combined ₹6,570 crore. This year, that number is ₹2.2 lakh crore. Over 53 lakh groups were financed this year alone. That’s a 34x increase in under two decades. It grew slowly, one group at a time, as banks saw these groups save and repay reliably and became more willing to lend to them.

Electronics have become a bigger export than gems, pharma, and petroleum combined once were

For most of India’s modern history, the list of things India sold to the world was pretty much the same: petroleum, gems and jewellery, textiles, and other raw materials. Things pulled out of the ground, cut, polished, or stitched.

That list has changed a lot in just five years. Electronics exports jumped from $11 billion to $48 billion, a 4.3x increase, overtaking petroleum, gems and jewellery, pharma and chemicals. Global electronics companies are also setting up manufacturing in India as they look for alternatives to China, helped by India’s incentive schemes.

But there’s another side to the story. Over the same period, India’s electronics imports rose from $54 billion to $116 billion — more than twice the value of exports, and growing even faster. India is selling far more electronics to the world, but it is also buying much more from it. The gap is now close to $68 billion.

A large share of what gets assembled and exported from India still runs on chips, displays, and components made somewhere else first. The finished phone leaving an Indian factory carries an Indian export number, but a lot of what’s inside it never was Indian to begin with.

India has built real assembly capability, at real scale, faster than almost anyone expected.What India hasn’t built yet is the deeper supply chain, the components that go into these products. The import numbers show just how much of that gap remains.

Why India’s factory boom is happening in villages, not cities

There’s a version of India’s industrial story almost everyone carries in their head. Small towns emptying out. Young men boarding trains for the nearest big city, chasing factory jobs that pay better than the family farm ever did. It’s the story that played out in China, and the assumption has always been that India would follow the same script. The numbers in this year’s report tell a different geography entirely.

In 1991, close to two out of every three working Indians were in agriculture. Today, it’s fewer than one in two. So people are moving out of agriculture. But they’re not necessarily moving to big cities. Since 2000, the share of rural men working in manufacturing, construction and mining has roughly doubled, from 14% to nearly 28%. In cities, the same number has barely changed. Urban male employment in manufacturing and construction was around 36% in 2000. Today, it’s about 34%. So where did urban workers go? Services.

Employment in trade, transport, IT and other services rose from 58% to more than 60% among urban men. Among urban women, the share rose from 52% to nearly 62%. India’s cities largely skipped the factory-town phase and moved into services. Meanwhile, more of the country’s industrial work has been happening in villages and small towns.

That changes how you think about the electronics boom too. India is building manufacturing capacity quickly, but the workers behind it may increasingly be outside the cities most people associate with industry. And while more Indian workers are moving into new kinds of work, the Indian capital is doing something interesting too.

Indian companies are betting on the rest of the world while retail investors bet everything on India

This year, Indian companies sent a record $33.8 billion of their own money into investments abroad, the highest that figure has ever been. These aren’t foreign fund managers guessing about India from a desk somewhere else. These are the businesses that actually run India’s growth story, choosing to put more of their own capital outside the country than ever before. In the very same year, Indian households put a record $84 billion into domestic mutual funds, nine times the size of what foreign investors pulled out of India. 

It’s tempting to put these two numbers side by side and treat them as a verdict, as if companies are losing confidence in India while households are becoming more bullish on it. But the numbers don’t tell us that.

An Indian company deciding where to deploy its next dollar has a genuinely global set of choices. It can build in India, enter a new market, acquire a company overseas, or invest elsewhere. When more corporate capital flows abroad, it reflects a decision made from a relatively wide menu of options.

The average Indian household doesn’t have the same menu. Investing overseas involves regulatory limits, paperwork, currency considerations and fewer familiar platforms. For most savers, putting money into Indian assets isn’t necessarily a decision made after weighing every market in the world. It’s simply the easiest and most accessible option available.

That makes the two numbers much harder to compare than they first appear.

A record amount of corporate money leaving India tells us something about where businesses see opportunities relative to the alternatives available to them. A record amount of household savings staying in India tells us something about where households are putting their money — but also about the limited set of alternatives they can realistically access.

India lost more banks than it gained this year, and it’s accelerating

The last one is about something that’s been happening for over two decades, and just picked up speed.

The number of banks registered under India’s deposit insurance system has been shrinking since the early 2000s, mostly small cooperative banks getting absorbed, shut down, or occasionally failing outright. This year had the sharpest one-year drop yet: 43 banks de-registered against just 11 newly registered, a net loss of 32 in twelve months. Some of those closures involved deposit insurance actually stepping in to pay out account holders.

This isn’t unique to India, and it’s worth knowing how the same story played out elsewhere. The United States had close to 14,500 community banks in the mid-1980s. Today it has fewer than 5,000, a two-thirds decline over about four decades, driven mostly by two things: bigger banks absorbing smaller ones, and small banks finding it harder every year to afford the compliance and technology costs that come with running a bank at all. 

Interestingly, researchers who’ve studied this consolidation in the US found the effect on local lending wasn’t as bad as feared,  post-merger banks often ended up bigger and more capable of writing larger loans, even as the number of standalone institutions kept falling.

India’s version of this story is still early, running at a fraction of the American pace, concentrated almost entirely in the smallest cooperative tier of banking. But the direction is the same, and this year’s data shows it’s no longer a slow drift. It’s accelerating. 

The India story is changing in the details

A farmer’s group becoming a bankable borrower is one small change. A factory being built closer to a village is another. A phone assembled in India, even if its most valuable components still come from elsewhere, is another. An Indian company investing overseas is another sign that Indian businesses increasingly think beyond the domestic market. None of these tells the India story on its own. But together, they point to something bigger: India is becoming a country with more ways to move money, make things, find work and participate in the economy.

Even fewer small banks can be part of the same story: an economy getting larger often changes the institutions that once served it. None of these shifts makes for a single dramatic headline. That may be exactly why they are easy to miss. But economies rarely transform in one big leap. They change when millions of small decisions start becoming possible that weren’t possible before.

That may be the more interesting India story hiding inside the numbers: not that the economy is simply getting bigger, but that the menu of things Indians can do with their money, work and businesses is getting wider.

Disclaimer: The information provided herein is intended solely for educational purposes. Investment in the securities market is subject to market risks, read all the related documents carefully before investing. The information contained in this document is for general purposes only and is not a complete disclosure of every material fact, terms and conditions. In the preparation of this material, Dezerv has used publicly available information and other sources believed to be reliable. While reasonable care has been taken to present reliable data in this document, Dezerv does not guarantee the accuracy or completeness of the data.

In short: After two years of going sideways, Indian equities enter the second half of 2026 with signs of improvement in a factor that had remained weak: company earnings. Nifty 50 profits grew about 18% in the June 2026 quarter, the fastest in ten quarters, and revenue growth led the way rather than cost-cutting. Valuations have eased to below their five-year average and to roughly a two-decade low relative to other emerging markets, and foreign investors turned net buyers in July and August, 2026 after a long selling stretch. The live risks are a fresh crude spike, margin pressure and a weaker rupee. For a long-term investor, this is the kind of setup where history has tended to reward time in the market over attempts to time the turn, though past patterns may not repeat.

On this page

• Why has the Nifty gone nowhere for two years?
• What is driving the economy while the index stalled?
• Are corporate balance sheets actually healthier?
• Is the earnings recovery real and broad-based?
• Have valuations become reasonable again?
• Are foreign investors coming back?
• What are the risks to this outlook?
• What does this mean for long-term investors?
• Exploring Equity Strategies at Dezerv
• Frequently asked questions

Why has the Nifty gone nowhere for two years?

The Nifty 50, India’s benchmark index of 50 large companies, is a small amount higher than it was two years ago, having dipped and recovered in between. That flat headline is the result of several forces cancelling out rather than a quiet market.

In late 2024, Indian equity valuations were elevated relative to their own historical ranges across several market segments. A large share of the market traded at rich multiples, which left little room for disappointment. What followed was a long reset: the Reserve Bank of India (RBI) tightened credit conditions into 2025, and a Foreign Portfolio Investor (FPI, an overseas institution investing in Indian markets) selling wave took hold. In March 2026, a conflict in West Asia pushed Brent crude above $100 a barrel for the first time since 2022 (U.S. Energy Information Administration, 2026), and foreign outflows that month alone reached ₹1,17,775 crore (NSDL data, via Outlook Money, 1 Aug 2026).

The economy underneath did not deteriorate the way the index suggested. That gap between a stalling market and a growing economy is what set up the current picture. The table below is the one-glance version of where the major indicators stand.

The state of Indian equities, August 2026

Figures are point-in-time and change with the market.

Want to understand what has been driving your portfolio’s performance through this market cycle? Book a portfolio review with Dezerv

What is driving the economy while the index stalled?

Through the flat market, policy shifted decisively towards putting money in people’s hands, which supports consumption and, in time, corporate revenue.

• Lower income tax. From the Union Budget 2025-26, annual income up to ₹12 lakh carries no income tax under the new regime, and up to ₹12.75 lakh for salaried taxpayers after the standard deduction (Press Information Bureau, 1 Feb 2025).
• A simpler GST. The Goods and Services Tax (GST), India’s indirect tax, was rationalised from four rates to two main rates of 5% and 18%, with a 40% rate on a few sin and luxury goods, effective 22 September 2025 (56th GST Council; EY India summary, Sep 2025).
• Cheaper money. The RBI cut the repo rate by a cumulative 125 basis points through 2025 to 5.25%, and moved banking-system liquidity from deficit to surplus (RBI Monetary Policy Committee, Aug 2026).
• More trade doors. India now has nine free-trade agreements spanning 38 countries; the India–European Free Trade Association pact came into force on 1 October 2025 and the India–United Kingdom agreement was signed on 24 July 2025 (EFTA; PIB, 2025-26).

The result shows up in the hard data: GDP grew 7.8% in the January–March 2026 quarter (MoSPI, via Business Standard, Jun 2026), and the RBI expects 6.7% for FY27.

Are corporate balance sheets actually healthier?

A recovery needs companies both willing and able to invest. On the ‘able’ side, the question is whether companies have the balance-sheet room to invest. The demand signals suggest capacity is now being put to work.

Demand is now meeting that repaired capacity. Manufacturing capacity utilisation has climbed back above its long-run average, to around 74–76% (RBI OBICUS survey, via Business Standard, 2025-26), the level at which firms typically start planning fresh investment rather than sweating existing plants. The banks are lending again, too: credit to industry grew 19.2% year on year in the fortnight to 30 July 2026, and the growth was broad-based across micro, small, medium and large firms (RBI sectoral deployment data, Jul 2026). The acceleration in credit growth may provide support for future corporate investment, although the extent to which this translates into capital expenditure remains to be seen.

Is the earnings recovery real and broad-based?

The June 2026 quarter showed a meaningful improvement in both profit and revenue growth. Whether this develops into a sustained and broad-based earnings cycle will depend on subsequent quarters.

Nifty 50 companies grew profit after tax (PAT, the bottom-line profit) by about 18% year on year, the strongest in ten quarters and well ahead of analyst estimates. More important than the headline, revenue grew about 19.4%, the fastest in eight quarters (brokerage aggregates of results, via Free Press Journal and Zee Business, Aug 2026).

Why does the revenue detail matter more than the profit number? For much of the slow patch, whatever profit growth companies managed came from cutting costs, and margins can only be squeezed so far. Sales growth is the more durable driver, because it reflects real demand rather than a one-off saving. A quarter led by revenue is a different, sturdier signal than a quarter led by cost control.

Watch out: company earnings are reported in rupees, so part of the reported growth in export-heavy sectors reflects a weaker rupee rather than higher volumes. Read profit growth alongside revenue growth, not on its own.

Have valuations become reasonable again?

Two years of a flat index while earnings caught up did something useful: it reduced valuation multiples without requiring a sharp index decline.

The Nifty 50 trades at a trailing price-to-earnings (P/E, the ratio of price to annual profit) of about 20.5, below its five-year median of roughly 22.1 and its ten-year median (NSE index data, via IndexPE, 17 Aug 2026). That is not screaming cheap, but for large Indian companies it is the lower end of the recent range rather than the top.

The starker shift is relative to the rest of the emerging world. India has long traded at a premium to other emerging markets, and foreign investors often cited that premium as a reason to stay light. That premium has now compressed to roughly a two-decade low (VanEck; MSCI data, 2026), and India’s weight in the MSCI Emerging Markets index has fallen from a record of about 19.4% in late 2024 to around 12%. Much of that reflects a rush into a handful of artificial-intelligence-linked names in Taiwan and South Korea, which together now make up close to half of their respective indices. India’s relative valuation premium has narrowed materially, reducing one of the valuation concerns that had been cited by some global investors.

Are foreign investors coming back?

For most of the last two years the answer was no, and that selling was a big reason the index stalled. Foreign investors were net sellers of more than four lakh crore rupees of Indian equities across 2025 and the first half of 2026, including that ₹1,17,775 crore exit in March 2026.

Two things changed the balance. First, domestic investors kept buying throughout. Monthly Systematic Investment Plan (SIP, a fixed regular investment into mutual funds) inflows reached ₹31,961 crore in July 2026, near record levels (AMFI, Jul 2026), domestic mutual-fund inflows provided an important source of demand during a period of foreign selling. Second, the foreign flow itself turned: FPIs were net buyers of ₹20,199 crore in July and ₹16,621 crore in the first half of August 2026, the first sustained buying after a four-month selling streak (NSDL, via Outlook Money and Business Standard, Aug 2026).

A word of caution on this point: for the 2026 calendar year to date, foreign investors are still net sellers of Indian equities. Two months of buying is a change in direction, not yet a completed trend.

Want to understand how your portfolio is positioned across market segments and asset classes? Book a portfolio review with Dezerv.

In their words

“The most heartening thing for me this earnings season has been the pickup in sales growth.”

— Kamlesh Lahoti, Head of Quant Research, Dezerv (Dezerv webinar, 15 Aug 2026)

The longer-run point is one Benjamin Graham made decades ago, and Warren Buffett later popularised:

“In the short run, the market is a voting machine; in the long run, a weighing machine.”

— Benjamin Graham (Security Analysis, 1934)

For two years the voting machine kept the Nifty flat. Earnings are what the weighing machine measures, and those have started to move.

What are the risks to this outlook?

A constructive case is not a certain one. Several things could interrupt it, and an honest reading names them.

• Crude and inflation. The March 2026 oil spike showed how quickly geopolitics can reach Indian prices. Consumer price inflation had already risen to 4.45% in July 2026 (MoSPI data, Jul 2026), and a fresh energy shock would push it higher and complicate the RBI’s room to keep rates low.
• Margins. The June quarter’s strength came partly at the cost of margins for some companies. Whether firms can grow revenue and protect profitability at the same time is the open question for the next few quarters.
• The rupee. A weaker rupee can reduce foreign-currency returns for overseas investors and may affect the relative attractiveness of Indian assets 
• Trade. An interim tariff framework with the United States took effect in February 2026, but the comprehensive agreement was still unsigned as of August 2026 (KPMG, 2026). Markets may already reflect some of this uncertainty, but the eventual terms and their economic implications remain relevant.

What does this mean for long-term investors?

The honest summary is that several indicators have become more supportive, including earnings growth, valuation moderation and recent foreign inflows. For a long-term investor, that distinction points to behaviour rather than prediction.

Time in the market has mattered more than timing it. In Dezerv’s analysis of historical Nifty 50 TRI rolling returns over the stated period, seven-year rolling observations were positive. This is a historical index observation only and does not imply that future seven-year periods will necessarily generate positive return. An analysis of Nifty 50 rolling returns since 1999 shows no seven-year period in which the index lost money; the weakest seven-year outcome was about +5% a year, and it returned more than 10% a year in roughly 85% of those windows (NSE / niftyindices data; past performance may or may not be sustained). Investors who exit during sharp declines may miss subsequent recoveries.

Selection matters more in some parts of the market than others. Mid- and small-cap companies can show greater dispersion in valuations, earnings growth and investment outcomes than large-cap indices. In such environments, security-level outcomes may vary materially, although identifying future winners consistently remains difficult. Dezerv’s analysis of more than six lakh mutual-fund portfolios found that fewer than 1% beat their respective benchmarks by more than one percentage point (Dezerv Wealth Monitor, data until Nov 2025), which is a reminder that a disciplined process, and honest asset allocation across equity and other assets, tends to matter more than any single call.

None of this is a recommendation to buy or sell on a particular day, or a view on any individual stock. How much of your portfolio should sit in equities, and in which segments, depends on your goals, your time horizon and your tolerance for the declines that come even in good years. 

Exploring equity strategies at Dezerv

For investors evaluating their long-term equity allocation, Dezerv offers different approaches depending on the role the allocation is intended to play within the portfolio.

Dezerv Equity Revival Strategy (ERS)
A diversified equity strategy that can allocate across large-cap, mid-cap, small-cap, value, growth, contra. The allocation is determined based on the fund manager’s assessment of economic, market and security-specific factors.

Dezerv Alpha Focus Strategy (AFS)
A diversified equity strategy that can allocate across mid-cap, small-cap, value, growth and contra categories, based on the fund manager’s assessment of economic, market and security-specific factors.

Both strategies seek long-term capital appreciation, are classified as equity strategies and are intended for investors with a high-risk appetite. The indicative investment horizon stated for both strategies is 36 months.

If you want a second view on how your own equity allocation is positioned for this cycle, you can book a portfolio review with Dezerv.

Key takeaways

• The Nifty 50 is roughly flat over two years, but the market underneath was reset: heavy foreign selling, cooling valuations, and a slump-then-recovery in profits.
• The June 2026 quarter delivered the missing piece: Nifty 50 profit up about 18% and revenue up about 19.4%, both multi-quarter highs, and led by sales rather than cost-cutting.
• Valuations have eased below the five-year average and to roughly a two-decade low versus other emerging markets; foreign investors turned net buyers in July and August after a long selling stretch.
• The real risks are a fresh crude spike and inflation, margin pressure, a weaker rupee, and the unfinished India–US trade deal.
• For long-term investors, historically, staying invested and being selective has tended to matter more than timing the turn; past performance may or may not be sustained

Frequently Asked Questions

Is 2026 a good time to invest in Indian stocks? Several indicators have improved in 2026, including earnings growth, valuation multiples and recent foreign flows. These developments describe a more supportive market backdrop than in parts of 2024–25, but they do not establish that future equity returns will be positive. Whether an equity investment is appropriate depends on factors including the investor’s objectives, horizon, existing allocation and risk tolerance

Why did the Indian stock market stay flat for two years? Several forces offset each other. Foreign investors sold more than four lakh crore rupees of equities across 2025 and early 2026, valuations that were stretched in late 2024 cooled off, and a West Asia conflict spiked crude in March 2026. At the same time the economy kept growing and profits recovered, so the index consolidated instead of falling.

Are Indian stocks still expensive?Large-cap valuation multiples have moderated relative to recent historical levels. The Nifty 50 trades at a price-to-earnings ratio of about 20.5, below its five-year median of roughly 22.1, and India’s premium over other emerging markets is near a two-decade low. Small-cap valuations remain richer than large-caps, so the answer varies by segment.

Are foreign investors buying Indian stocks again? They turned net buyers in July 2026 (₹20,199 crore) and the first half of August (₹16,621 crore), after a four-month selling streak. However, for the 2026 calendar year to date foreign investors are still net sellers overall, so this is a change in direction rather than a completed trend.

What are the biggest risks to Indian equities now? A fresh spike in crude oil and inflation, which had already risen to 4.45% by July 2026; pressure on company margins after a strong quarter; a weaker rupee; and the still-unsigned comprehensive trade agreement with the United States. Any of these could interrupt the recovery.

Should I invest a lump sum or in staggered instalments? This is a general educational point, not advice for your situation. Both approaches are widely used: staggering investments spreads the entry points over time and therefore reduces dependence on a single purchase date, while a lump-sum investment deploys the capital immediately and gives it greater time in the market. The right choice depends on your horizon, how much of your portfolio is already in equities, and your tolerance for short-term swings. Discuss your specific case with a qualified professional.

Disclaimer

Dezerv Investments Private Limited (“DIPL”) is registered with the Securities and Exchange Board of India (“SEBI”) as a Portfolio Manager (SEBI Registration No. INP000007377). Distribution services are offered through Dezerv Distribution Services Private Limited, a wholly owned subsidiary of DIPL, which is registered with AMFI as a Mutual Fund Distributor (ARN-248439) and with APMI (APRN-00615).

This article is intended solely for general information and educational purposes. The views, opinions, market commentary, estimates, data and other information expressed herein are based on information available as of the dates stated and are subject to change without notice. They do not constitute investment advice, financial planning, a recommendation, solicitation, invitation or offer to buy, sell or hold any security, financial product or investment strategy, and should not be construed as such.

The information contained herein is general in nature and does not take into account the specific investment objectives, financial situation, risk profile, investment experience, investment horizon or other circumstances of any particular investor. No representation is made that any investment, strategy, security, asset class or market discussed herein is suitable for any particular person. Investors should independently evaluate the appropriateness of any investment and seek advice from a suitably qualified professional, where required.

References to historical market performance, index returns, earnings, valuations, flows or other historical data are provided for illustrative and informational purposes only. Past performance is not indicative of future performance and may or may not be sustained in the future. Any forward-looking statements, expectations or assessments of market conditions are inherently uncertain and actual outcomes may differ materially.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing. The information/data contained herein is not intended to be a substitute for professional investment advice and, by itself, is not sufficient for making or implementing an investment decision or investment strategy.

Twelve years later, the market gave investors another crash to respond to. In March 2020, the Nifty fell ~38% in under six weeks, one of the sharpest crashes Indian markets have ever seen.
The reactions were strikingly different. India’s SIP closure ratio jumped to 70% that month, meaning roughly two existing SIPs were being stopped for every three new ones being started. But at the very same time, new demat account openings hit a record 4.9 million that financial year, as a fresh wave of investors treated the crash as their entry point. 

Two groups of investors, watching the same kind of collapse in the same country, developed very different instincts about what a falling market actually means. Neither group was being careless. They were looking at the same crash, but their past experiences had taught them to interpret it differently. And that influence can overpower our judgement when we’re making crucial decisions.

There’s a name for this effect. In this week’s newsletter, I want to unpack where it comes from, how it shapes our decisions, and why you may start noticing it in almost every financial decision you make.

In this edition:

• What behavioral economist calls this, and why It behaves differently from every other bias
• Why fear leaves a deeper mark than facts, and why so many Indian households still trust gold over the market
• What years of market crashes have taught our instincts
• A framework for managing a bias you cannot simply think your way out of
• Why this matters more in an AI-driven market

What behavioral economist calls this, and why It behaves differently from every other bias

Most of what we know about money mistakes comes down to a fairly simple idea, that people don’t process information perfectly. We anchor on the first number we’re shown, we feel the pain of a loss more sharply than the pleasure of an equivalent gain, and we assume tomorrow will look roughly like yesterday. These are the biases behavioral economics has spent decades cataloguing, and the fix for most of them is straightforward in theory. Learn to recognize the pattern, and you can correct it.

What happened to Pai doesn’t follow that rule. Researchers call this the Experience Effect: two people can look at the same information and develop very different financial instincts simply because of what they have personally experienced.

To see how powerful this can be, let’s look at the case of Henry Wallich. In 1974, Wallich joined the board of the US Federal Reserve. He wasn’t an ordinary appointee. He had a PhD from Harvard, a professorship at Yale, and decades of experience studying economies at the highest level. If anyone in that room could be trusted to read the data correctly, it was him.

For the next twelve years, every time the Fed’s committee met to set interest rates, Wallich was looking at the same forecasts and the same models as every other governor in the room. And yet he dissented 27 times, a record that still stands, almost always pushing the same way, for higher rates, even when his colleagues, staring at identical numbers, were convinced it was safe to ease.

When researchers later studied the voting records of every Fed governor going back to 1951, the same pattern turned up again and again. People who had personally lived through high inflation stayed cautious about it for the rest of their careers, no matter what the data in front of them said in any given meeting. Wallich had lived through Germany’s hyperinflation as a child, watching prices double in a day and his family’s savings turn worthless. 

Pai had lived through five years of a portfolio that refused to recover. The decades and the currencies were different, but the mechanism underneath was the same one, and it’s what sets experience effects apart from every other bias behavioral economics has documented. Most biases weaken the moment you learn to spot them in yourself. This one doesn’t, because simply knowing about it isn’t enough to switch it off.

Why fear leaves a deeper mark than facts, and why so many Indian households still trust gold over the market

Walk into almost any Indian household built by a parent or grandparent who came of age before the 1990s, and you’ll usually find the same split, a locker full of gold, a stack of fixed deposit receipts, and a noticeable discomfort with anything resembling equity. Ask why, and there’s often a story behind it: a bank that failed, a business that collapsed, or a period when keeping money in cash felt like the safest thing to do.

That instinct becomes much easier to see when you look at the numbers. Indian households hold an estimated 30,000-35,000 tonnes of gold, worth around ₹450 lakh crore, more than the country’s entire GDP. Even within financial assets, the preference for safety is clear. Of the ₹353 lakh crore in household financial assets, ₹153 lakh crore is in bank deposits and just ₹41 lakh crore is in mutual funds. Only 5.3% of household savings goes into financial products. Much of the rest remains in gold, property and deposits, assets that have felt familiar and safe for generations.

That instinct isn’t stubbornness, and it isn’t really about intelligence either. It comes down to how the brain stores an experience in the first place. When you learn a fact from a book or an advisor, your brain files it away as information, useful, but essentially inert. 

When you live through something frightening instead, watching a family’s savings shrink or a business go under, the brain does something different. It tags that memory with the fear that came alongside it. Neuroscientists call this emotional tagging, and fear-tagged memories are both easier to recall and quicker to resurface than ordinary facts, especially when something even loosely similar happens again. Every repeat brush with that fear strengthens the pathway a little further.

The fingerprint of this shows up clearly in the data on investing behavior. One study compared people who had lived through strong stock market returns over their lifetimes with people who had lived through consistently weaker ones, holding the information available to both groups constant, and found the first group was 14 percentage points more likely to invest in stocks at all, against an average market participation rate of just 37%. 

The same pattern turns up among people whose entire job is supposed to be rational about money. Fund managers who lived through a bubble tend to carry that bubble’s shadow into every market cycle that follows. CEOs who led companies through severe downturns were found, using photo-based aging analysis, to visibly age faster than peers who hadn’t. An entire generation of Americans who grew up during the high-inflation 1970s kept avoiding cheaper adjustable-rate mortgages decades later, purely because the fear had never fully left them, a habit that cost that generation of borrowers a combined $22 billion in unnecessary interest.

None of this reflects a failure of intelligence in any of these people. It’s memory doing precisely what memory evolved to do, protecting them from something that, by the time the decision actually gets made, has usually already stopped being a real threat.

What years of market crashes have taught our instincts

The Sensex fell nearly 53% in less than a year during 2008. Across the country, investors pulled back from equity funds almost entirely. Net investment in equity mutual funds fell to just ₹1,056 crore in 2008-09, and dropped further to ₹595 crore the following year.

By September 2010, the Sensex had climbed back above 20,000, close to its pre-crash highs. Household savings in gold more than doubled in the years after, from 1.3% of GDP in 2008-09 to 2.8% by 2011-12, as investors moved money out of markets and into something that felt safer. 

And by fiscal year 2010-11, Indian investors withdrew ~₹13,500 crore more from equity mutual funds than they invested. Even though the market had already recovered, the memory of 2008 was still fresh. The numbers said it was a reasonable time to stay invested. What people remembered said otherwise, and across the country, memory won. 

Demonetisation in 2016 did something a little different but closely related. It made cash itself, the most trusted asset in most Indian households, feel unreliable overnight. 

Covid period added a different kind of shock, and this one was felt worldwide. It wasn’t just the market fall, but the stress that came with it. Researchers measuring reported stress across seventy years of inflationary periods found Covid-era inflation produced stress levels roughly three times higher than any period on record, higher than the Great Inflation of the 1970s, higher than 2008 itself. 

Then came the global rate-hike cycle in 2022. As central banks raised rates sharply, investors became less willing to pay high valuations for companies whose profits were still years away. And richly valued growth stocks fell hard within months.

These experiences don’t simply vanish when the market recovers. Behavioral research shows that lived experiences physically alter how our neural pathways process future choices, a mechanism known as long-term potentiation. The trauma of a market crash leaves a lasting biological trace that shapes our basic instincts around risk.

How to manage a bias you cannot simply think your way out of

None of this means the instinct is a flaw to be argued away, because you cannot lecture a brain out of a biological memory. No amount of spreadsheets or market commentary erases an emotional impulse wired by past stress. Awareness on its own doesn’t fix experience effects. What actually works looks a little different, and it starts before the next shock ever arrives.

Build rules while markets are calm. A portfolio decided ahead of time, with clear triggers for when to rebalance, is far less likely to be driven by fear once markets actually turn. The goal is to decide what you’ll do before emotion gets a vote in the matter.

Separate the decision from the moment. The worst financial calls tend to get made exactly when fear or excitement is at its peak. A short pause between a market event and a portfolio decision can be the difference between reacting to something and actually responding to it.

Whether a shock leaves a lasting mark also comes down to two things: how much you saw it coming, and how much control you had over your own response to it.

The matrix below maps out what that looks like in practice, and what moves you toward safer ground.

Bring in a perspective that doesn’t share your scars. You may not always see how your past is influencing a decision. Someone who didn’t live through your 2008 or your 2020 may look at the same numbers without the same emotional baggage, and spot something you can’t.

Your instincts aren’t necessarily wrong. They’re shaped by what you’ve lived through. The best defence is to have a system and another perspective that can challenge those instincts when they start driving the decision.

Why this matters more in an AI-driven market

Two people looking at the exact same stock today can pull up nearly identical research within seconds, earnings transcripts, analyst notes, sentiment scores, all surfaced by the same AI tools within minutes of each other. Whatever edge used to come from knowing something first is disappearing at the exact pace AI keeps improving.

What isn’t disappearing is the part of investing that was never really about information to begin with.

Every investor carries instincts shaped by what they’ve personally lived through, and no model can read those instincts for you, because you often can’t fully read them yourself. AI gets better at analysis every quarter. It gets no better at knowing whether your own conviction about a stock is coming from research, or from the year you happened to start investing.

This is why behavioural edges can last longer than informational or analytical ones. They don’t depend on having better data or faster models. AI may make information, analysis, and even sophisticated tools available to everyone. What it can’t easily equalise is how each person responds to uncertainty, fear, and opportunity. The real advantage lies in knowing when you’re making a considered financial decision, and when an old experience is making it for you.

Disclaimer: Investment in the securities market is subject to market risks, read all the related documents carefully before investing. The information provided herein is intended solely for educational purposes and should not be construed as solicitation, advertising, or providing any financial or investment advice or an offer to buy or sell any financial instruments. Readers are advised to consult with their financial advisor before making investment decisions based on the information provided herein. In this material, Dezerv has utilized information through publicly available sources, and other data deemed to be reliable. While reasonable care has been made to present reliable data in this article, Dezerv does not guarantee the accuracy or completeness of the data. Dezerv, along with its directors, employees, or partners or any of its affiliates, shall not be held liable for any loss, damage, or liability arising from the use of this document.

Fidelity later looked at how its actual investors had done over those same thirteen years, and found something strange. The average investor in Magellan had lost money.

Somewhere during that thirteen-year run, thousands of investors watched the fund soar, grew confident, and invested near the peak. Then came an inevitable rough patch. The fund fell, they panicked, and sold, only to watch it recover without them. Many eventually bought back in, but only after it felt safe again, paying higher prices for the same fund they had just abandoned. Lynch never had a bad year that broke the fund. His investors kept breaking their own returns by reacting to every wobble along the way.

This isn’t unique to one fund or one country. It shows up wherever markets meet human nature, and Indian mutual fund investors are not immune to it either. SIPs get paused the moment markets wobble, and withdrawals often happen right when patience matters most. 

So, on 23rd July 2026, SEBI released a consultation paper that seems to be built around exactly this problem, less about chasing better returns, more about helping people hold on to the ones already available to them.

The new consultation paper proposes to introduce a ‘MF only PMS’ framework wherein it proposes to reduce the minimum investment for portfolio management services from ₹50 lakh to ₹25 lakh, provided the client investments are done only in direct plan of mutual fund schemes, ETFs, and SIFs. This could make professional portfolio management accessible to many more investors.

So how will this actually work? Why did SEBI decide to do this now? And what does it mean for investors, and everyone else sitting in this ecosystem? That’s what today’s newsletter is about.

In this edition, we’ll cover:

• Why SEBI felt the need to introduce a new MF-PMS framework
• Who has SEBI actually built this for?
• What exactly did SEBI propose?
• How does Dezerv see this playing out and what does this mean for investors?
• The real value of a portfolio manager
  

Why SEBI felt the need to introduce a new MF-PMS framework

Professional portfolio management reaches a tiny slice of India’s investing public. SEBI’s own consultation paper puts the number of PMS clients at roughly 2.19 lakh, up from 1.5 lakh in April 2019. Against a base of crores of Indian investors, that’s a strikingly small number. The main reason is the ₹50 lakh minimum investment. Interestingly, that threshold hasn’t always been the same.

When PMS regulations were first introduced in 1993, the minimum investment was ₹5 lakh. SEBI raised it to ₹25 lakh in 2012, where it remained for nearly eight years. Then, in 2020, the minimum investment was increased again to ₹50 lakh. 

At the same time, the minimum net worth required to run a PMS was raised from ₹2 crore to ₹5 crore. The reasoning was straightforward. Traditionally, PMS has been associated with direct equity, with many strategies built around concentrated bets on individual stocks. That can make them more volatile than a diversified mutual fund. SEBI has therefore viewed PMS as a product better suited to investors with a higher risk appetite and the financial capacity to absorb losses. That’s the thinking that kept the ₹50 lakh minimum investment in place for so long.

But not every PMS follows that approach. Some portfolio managers build portfolios entirely using mutual funds. Since these portfolios invest only in mutual funds, and not individual stocks, they carry a very different risk profile. Recognising this difference, SEBI has proposed a separate category with a lower minimum investment of ₹25 lakh. The idea is simple: if the investment universe is more restricted and diversified, the entry barrier can also be lower.

Who has SEBI actually built this for?

There’s a sizeable population of Indians who have built meaningful wealth through mutual funds and SIPs, managing their own investments as their portfolios grew over time.

But managing it alone gets harder over time. Mutual funds were built to make investing simpler than picking individual stocks. Yet India now has roughly 2,000 mutual fund schemes chasing about 500 investible stocks. The tool designed to remove a hard decision has slowly turned into a hard decision of its own, and until now, there hasn’t been a formal way for this segment to hand that decision and execution to an external expert to make it.

When regulated wealth management isn’t accessible, people often turn to other sources of advice. A CFA Institute study found that only about 6% of India’s financial influencers are registered with SEBI, up from just 2% a year earlier. Yet a third of them still give specific investment recommendations. Around 8% of investors surveyed said they had lost money after acting on advice from someone who wasn’t regulated. 

SEBI’s new consultation paper aims to make regulated portfolio management available to more investors.

What exactly did SEBI propose?

The new structure is called MF-PMS, short for Mutual Fund only Portfolio Management Services. A regular PMS can invest in stocks, bonds, REITs, foreign securities, and more. MF-PMS strips that down to just one thing: Direct Plan mutual funds, ETFs, and a category called Specialized Investment Funds. Nothing else. That’s a deliberate choice. A portfolio manager under this structure gets discretionary control over the money, meaning they can buy and sell without checking with the client every time. But they can only do it using the same mutual funds any investor could buy on their own.

Two numbers make this proposal work. The minimum investment for a standard PMS is ₹50 lakh. For MF-PMS, it drops to ₹25 lakh. And the net worth a portfolio manager needs to even offer this service drops too, from ₹5 crore to ₹2 crore.

When it comes to switching portfolio managers, whether under Standard PMS or MF-PMS, it doesn’t mean liquidating everything and triggering a tax event. Demat portability with in-specie transfer lets an investor move the portfolio to a new manager without a forced sale.

How does Dezerv see this playing out and what does this mean for investors?

When we launched our mutual fund PMS in 2022, the idea wasn’t easy for people to understand. Competitors, other wealth managers, and even prospective clients would ask the same question: Why would anyone pay a PMS to invest in mutual funds when they could just do it themselves? SEBI’s proposal answers that question. Instead of lowering the minimum investment across all PMS categories, it lowers it only for mutual fund-only PMS, recognising it as a separate category.

We’ve had prospective clients who wanted professional portfolio management but couldn’t access it because they hadn’t crossed the ₹50 lakh minimum. Often, they already had substantial mutual fund portfolios and simply had to wait. A ₹25 lakh threshold changes that.

It also changes how the industry evolves. As more investors become eligible, portfolio managers will have to earn trust through their investment process and long-term performance, not just by offering access. Lower compliance requirements could also encourage more registered investment advisors to become portfolio managers, giving investors more choice.

For investors, the portfolio continues to stay entirely in Direct Plan mutual funds, ETFs and SIFs. A licensed portfolio manager handles asset allocation, fund selection and rebalancing, while investors continue to benefit from the lower costs of direct plans without paying distributor commissions. The investor also gets two layers of oversight instead of one, mutual fund rules at the product level, PMS rules at the portfolio level. And If they decide to switch managers, the portfolio can move without forcing a sale and creating an unnecessary tax event.

The consultation paper also expands what a standard PMS can invest in by allowing international securities and unlisted debt. Investors who want a broader mandate get more flexibility, while MF-PMS offers a simpler option for those who want to build wealth through mutual funds.

Overall, this proposal makes professional portfolio management available to many more investors while giving them more choice in how they want their money to be managed.

The real value of a portfolio manager

Ask most people what a good portfolio manager does, and they’ll probably say picking the right funds. But a recent study by ET Wealth and Crisil suggests that staying invested may matter even more. The study analysed SIP returns across 120 diversified equity mutual funds between January 2011 and March 2026, and found that the probability of losing money fell from 22.7% after one year to 2.3% after five years, and to zero after ten years. It also found that returns became much more consistent the longer an investor stayed invested.

The challenge is that many investors don’t stay invested long enough. When markets fall, it’s easy to stop SIPs or redeem investments. But those periods are often when patience matters the most. This is where an MF-PMS can help. A portfolio manager isn’t just there to choose mutual funds. They can rebalance the portfolio when needed and help investors stay invested through market ups and downs, giving them a better chance of earning the returns that long-term investing has historically delivered.

In summary

For years, mutual funds have become the preferred way for millions of Indians to build wealth. This proposal focuses on what happens after that, how those investments are managed as portfolios grow larger.

The framework is deliberately simple. Investments remain in Direct Plans, fees are capped, and the investment universe is limited to mutual funds, ETFs and SIFs. At the same time, it gives experienced advisors an easier path to become portfolio managers and offers investors with ₹25 lakh a regulated way to access professional portfolio management.

If implemented, it could help fill a gap that has existed for years. Investors who have outgrown managing their own portfolios but don’t yet qualify for a traditional PMS would finally have an option designed for them. In many ways, this is the next step in the evolution of India’s mutual fund industry. The focus is no longer just on making investing accessible, but also on making professional portfolio management accessible.

Disclaimer: This newsletter is intended solely for informational and educational purposes and should not be construed as investment, legal, tax, regulatory or financial advice, or as a recommendation, solicitation or offer to buy or sell any securities or investment products. The views expressed are based on publicly available information believed to be reliable as of the date of publication and are subject to change without notice. References to the SEBI Consultation Paper relate to proposed regulatory changes that are subject to public consultation and final approval by SEBI and should not be construed as the prevailing regulatory framework. Any historical data, illustrations, studies or third-party statistics referred to herein are for informational purposes only and are not indicative of future performance or outcomes. Investment in the securities market is subject to market risks, read all the related documents carefully before investing. The information contained in this document is for general purposes only and is not a complete disclosure of every material fact, terms and conditions. All trademarks, logos, and brand names mentioned are used for identification purposes only. Dezerv Investments Private Limited is a Portfolio Manager with SEBI Registration no. INP000007377 

Seven years later, in Gurugram, another pair of college friends watched their first startup fail. Instead of rushing into the next idea, they spent months riding with AC repairmen to understand why India’s home services market never worked. What they built next now serves millions of households every month.

Almost a decade later, a group of auto drivers in Bangalore asked two people at a fintech company to build them an app that wouldn’t eat into their earnings. Before writing a single line of code, they drove autos themselves to understand the problem.

That same year, a former employee of the original bookstore startup shut down his own company, returned $9 million to investors, and started again. Today, his travel card company is one of India’s fastest-growing startups.

Bet you got at least two of those right.  

Flipkart. Urban Company. Namma Yatri. Scapia. 

Yesterday, we hosted the founders behind each of those stories, Binny Bansal of Flipkart, Magizhan Selvan of Namma Yatri, Anil Goteti of Scapia, and Varun Khaitan of Urban Company, on our webinar. It turned out to be one of the largest we’ve ever hosted, with over 5,000 people tuning in.  In today’s newsletter, I’ll share the best lessons and insights from the session. If you missed the session, consider this your front-row seat. If you joined us live, think of it as the key takeaways worth revisiting.

In this edition:

• How Flipkart hired people before equity had value
• When salary beats equity (and when it doesn’t)
• The right time to take money off the table
• Why selling at the first buyback isn’t always the best move
• What changes after your company goes public
• How one ESOP programme created hundreds of founders

Equity means something very different to a fifth employee than to a five-hundredth. That’s the whole reason we built this webinar as an arc, tracing a company’s journey from its earliest days to a decacorn, one founder per stage.

There was no better place to start than with Binny, who has lived that arc himself — from building Flipkart from scratch to now building Opptra.

Flipkart’s story is one every founder in the room had grown up hearing. What doesn’t get talked about enough is what it took to convince people to join before there was anything to believe in. There was no funding in the early years, so there was no salary to speak of. What Binny and Sachin could offer instead was ownership, a promise that if the company worked, everyone who helped build it would share in that outcome.

That reads as obvious now. It wasn’t then. Most people in 2008 didn’t see equity as something with real value, so joining Flipkart meant betting on a currency almost nobody trusted yet. In hindsight, the people who chose equity turned out to be the ones willing to build for the long term. There wasn’t even a formal ESOP policy in those first years,  just a promise, a number, and paperwork that came later.

That same instinct — reward belief and not certainty, shaped how Flipkart handled failure. When the company acquired Mime360, a music startup meant to become something like an iTunes for India, the product never found its market. But instead of writing off the team, Flipkart moved most of them into other roles, ESOPs intact. Judge people by why something failed, not by the fact that it failed.

The same logic runs through how Binny thinks about buybacks. There’s no clean, universal schedule, a company runs one when it can afford to, and when doing so reinforces the behaviour it wants to reward. Buybacks should happen when the company is healthy enough to afford them.

What that early philosophy compounded into is worth noting. Flipkart’s ESOP programme has since created roughly ₹12,000 crore of wealth for employees. The more interesting number sits one layer beneath that: former Flipkart employees have gone on to start more than 300 companies. Six have become unicorns. Together, they employ over 40,000 people.

That’s the point where equity stops looking like compensation and starts looking like infrastructure. It doesn’t just create wealth for one generation at one company. It creates founders, who create companies, who create opportunities for thousands more people who never set foot inside the original building. 

Seed to Growth: Believing Before There’s Proof

If Flipkart showed us what happens at the end of the journey, Namma Yatri showed us what it looks like at the beginning, when choosing between salary and equity is still a very real decision.

Magizhan Selvan aka Magz thinks about this less like a job decision and more like asset allocation. Salary is the fixed income, it protects the downside and removes financial stress. ESOPs are the upside, reached for only once the downside is covered. The one place this framework breaks from normal investing logic: with equity in your own company, you’re not just holding a position and watching a scorecard. You can move the outcome yourself.

That’s why joining an early-stage startup is not just a financial decision. When Magz joined Namma Yatri, he considered taking his entire compensation as ESOPs. But instead, he kept a small salary to cover his living expenses. The logic was simple: you can believe completely in the company and still need enough cash to wait for that belief to pay off.

The instinct to leave equity alone once granted follows the same logic. Magz didn’t track the ESOPs from his previous company for two years — not something he’d recommend, read your grant letter — but the behaviour is sound. An ESOP behaves like a seed: you grow it by building the product, not by digging it up to check on it, and let the liquidation event arrive whenever it arrives.

The hardest part comes in the years before the company starts to work. Your friends at larger companies are earning more, while you’re putting in longer hours for less. This is what you call the “zone of frustration”, a phase almost every early employee goes through before the rewards start to catch up and I’ve talked about this in detail in my book, The Millionaire Employee.

Before accepting an offer with a large equity component, Magz suggests doing one thing: get to know the founders and the team. Meet them in person if possible. It’s often the best way to understand what you’re really signing up for.

Growth to Unicorn:  When Paper Wealth Turns Real

Anil Goteti has stood on both sides of this stage — first as an early Flipkart employee negotiating his own equity, later as the founder of Scapia, running his company’s first buyback.

He arrived at Flipkart with more equity literacy than most, having worked in the Bay Area, and asked for twice the ESOP he was initially offered. Binny suggested waiting a year or two before revisiting the conversation. In the end, Anil never needed to bring it up again. Flipkart made sure its employees were well rewarded.

The belief that actually reshaped how he thinks about equity came earlier, at Qualcomm, his first job. He held stock for five years, planning to cash it in for an MBA. Then he resigned,  and inside his three-month exercise window, a lawsuit hit the company. The stock fell underwater. He walked away with a tenth of what he’d planned on. 

Since then, Anil has exercised every ESOP he’s received. His advice is simple: don’t wait for the perfect moment. Sell a little over time instead of trying to time it all at once.

The same discipline shapes how he decides when Scapia should run a buyback: whether the milestones justify it, whether the company can afford it, and who’s actually earned it. Not a founder’s unilateral call,  it sits with the founder and the board together.

Unicorn to Decacorn: Staying Hungry After You’re Already Rich

Urban Company’s Varun Khaitan sits at the stage every founder eventually has to reckon with: what happens to ambition once the wealth is no longer theoretical.

When Urban Company went public last year, the IPO didn’t feel like the finish line for Varun. Two days later, the team was back at work, focused on what came next. That was the biggest takeaway for me. Companies that keep growing don’t treat milestones as destinations. They simply move on to the next problem.

What changes after listing isn’t ambition. It’s the emotional texture of the wealth itself. Being told your equity is worth something and watching that number move on a screen every day are two different experiences. On the days it dips, people feel like they’ve “lost” money they could have taken off the table earlier, even though nothing about their underlying ownership changed. Watching your wealth go up and down every day can make even long-term investors think short term.

The mechanical shift underneath is precise: private employees can’t sell even if they want to, so a founder’s job before listing is mostly narrative, to get people to believe in the destination. Public employees can sell whenever the market allows, and no founder can stop that. So the job afterward becomes coaching people to think in four- or five-year horizons instead of daily price movements.

Urban Company has lived this directly, with its own stock swinging 20 to 30% at points, and the actual day-to-day work is keeping longtime employees calm through cycles they’ve already lived through once, and getting newer employees to stop checking the price altogether.

In Summary

Underneath all of it sits one requirement that hasn’t changed at any stage of this arc: the equity only makes sense if you believe in where the company is headed years out, not where it trades today. That’s the one thing every founder here, from a startup with no funding to a public company with a ticker, was actually asking their people to do. Believe first and the wealth will follow.

More from the session, dissected in detail,  find the full breakdown here.

A country that had been independent for barely fifteen years, still counted among the poorest in the world, decided to build a space program out of a church – one that would eventually become ISRO. The scientists were mocked in the streets for it.

Sixty-four years later, on the evening of July 18, 2026, people gathered on a coastline not far from that same stretch of India, this time at Sriharikota, watching a very different kind of rocket lift off. It was called Vikram-1. And unlike everything that had launched from Indian soil before it, this one wasn’t built by the government. 

It worked on the first try. The payload settled into a stable 450-kilometre orbit exactly as planned. The mission was named Aagaman – arrival. With that single flight, India became only the third country in the world, after the United States and China, where a private company has independently put a satellite into orbit.

The visionaries behind it were two former ISRO engineers, Pawan Chandana and Bharath Daka, who quit their jobs to start Skyroot, the company that built the rocket. At the time, what they were attempting wasn’t just difficult, it was illegal. There was no policy in India that allowed a private company to launch anything into space. They spent years designing a rocket before there was even a legal way to fly it.

This week’s newsletter tells the story of Skyroot, explores India’s private space industry, explains how a rocket business makes money, and asks whether India can build its own SpaceX.

In this edition:

• How 400 space startups appeared in 12 years
• How two ISRO engineers with no capital talked their way into ₹10 crore
• How a rocket company actually makes money
• Can Skyroot become the SpaceX of India?
• Is a successful launch the same as a successful business?
• As a wealth creator how should you look at it? 

The rise of India’s private space-tech industry

In 2014, there was exactly one organisation in India doing meaningful space work: ISRO. By March 2026, that number had crossed 400 private space startups.

That jump didn’t happen on its own. In 2023, the Indian Space Policy opened the entire space value chain – manufacturing, launch, applications, everything downstream –  to private companies for the first time.  A new regulator called IN-SPACe was set up as a single window for approvals, instead of forcing startups to navigate multiple government departments. As of mid-2026, it has registered over 4,500 organisations and cleared 133 launch and operating authorisations.

The government has also built capital specifically for this sector. There’s a seed fund offering grants of up to ₹1 crore.  A ₹1,000 crore venture fund, deploying ₹100-250 crore a year through 2030 and a separate ₹500 crore fund covering up to 60% of a startup’s technology costs. 

On the private side, Speciale Invest and Starburst are the most active investors in Indian space tech by deal count. Speciale Invest recently raised a ₹1,400 crore deep-tech fund. Strategic investors are joining in too, with Reliance backing Digantara and HDFC Bank investing in Agnikul Cosmos. Global investors are already here as well, with GIC backing Skyroot and Google investing in Pixxel.

With more than 400 startups and billions of rupees flowing into the sector, it’s worth looking at where the money has gone so far. Not all of these companies do the same thing. Some, like Skyroot and Agnikul, build rockets. Others, like Pixxel and Dhruva Space, build satellites and space applications. Across the ecosystem, Skyroot has raised the most funding so far. 

How big is this opportunity, really?

India’s space economy was worth $8.4 Bn in 2022. That’s about 2% of the global market. The government wants to grow it to $44 Bn by 2033, taking India’s share to 8%. To get there, the industry needs to grow at 16% a year for the next decade.

And the opportunity goes far beyond rockets.The government splits the space economy into three broad buckets, and launch, the business Skyroot is in, is actually one of the smaller ones by value, growing from $0.72 Bn to $3.5 Bn by 2033. That doesn’t make rockets any less important. Nothing else in the space industry works without them. But the bigger opportunity isn’t the rocket itself. It’s everything that happens after a satellite reaches orbit.

That’s where private companies like Skyroot Aerospace, Pixxel, Dhruva Space, Digantara, and SatSure come in, each building a different part of India’s space ecosystem.

Private investment in Indian space reached about $111 million in 2022, with most of the money going into early-stage startups building rockets and satellites. The next push is to bring in more venture capital, private equity, angel funding, and easier bank financing as these companies grow.

The model is simple. ISRO develops the technology, shares its infrastructure and expertise, while IN-SPACe creates the policies and approvals. Private companies then take that technology and turn it into sustainable businesses.

How two engineers with no capital built a rocket company

Chandana studied mechanical engineering at IIT Kharagpur and joined ISRO in 2012 at a starting salary of ₹35,000 a month. He worked on the LVM3, India’s largest rocket, which later carried Chandrayaan missions toward the Moon. His flatmate, Naga Bharath Daka, his flatmate and now co-founder, was an electronics engineer. From the start, Chandana focused on propulsion and structures, while Daka handled electronics and software.

In 2018, they left ISRO to start Skyroot Aerospace. They had no fundraising experience. Chandana has said they had to Google terms like “what is fundraising” and “what is a term sheet” before meeting investors. They didn’t even have a pitch deck or a website. A friend sent a LinkedIn message to Mukesh Bansal, the founder of Myntra and Cure.fit. Bansal responded, flew down, and committed to invest within an hour of meeting them.

That first cheque brought in around ₹10 crore, one of India’s largest deep-tech seed rounds at the time and gave Skyroot nearly 2.5 years of runway. The founding team had just 15 people, most with no ISRO background. They came from aviation, manufacturing, and fresh engineering colleges, joining largely through word of mouth.

After Vikram-S succeeded in 2022, GIC, Singapore’s sovereign wealth fund, backed a $50 million round, the largest the Indian space sector had seen. Skyroot has since crossed unicorn status, one of India’s fastest deep-tech companies to get there. 

How does a rocket company actually make money?

Think of Skyroot as a logistics company for space. Companies that own satellites pay Skyroot to carry them into orbit, much like businesses pay a shipping company to transport cargo.

Why do they pay for this? Because their businesses rely on satellites for two things: communication and Earth observation.

Communication covers internet, phone, and broadcast services in places where fibre networks can’t reach. Earth observation involves satellites capturing images and data that help farmers monitor crops, governments respond to floods and wildfires, businesses plan infrastructure, and weather agencies improve forecasts.

A single Skyroot launch costs around ₹100 crore. At 20 launches a year, that could translate into ~₹2,000 crore in annual revenue. The opportunity exists because satellites have become much smaller. Today, over 90% of satellites launched weigh under 300 kg, creating demand for smaller, dedicated rockets instead of giant ones.

That’s where Skyroot fits in. Vikram-1 is Skyroot’s biggest proof so far. It can carry payloads of up to 350 kg, uses an all-carbon composite structure and a 3D-printed engine, and reached orbit on its very first attempt.

Building it cost under $30 million, compared with the roughly $1 billion historically spent on similar global programs. Skyroot expects 70-80% of demand to come from international customers, and its factory can produce one Vikram-1 rocket every month.

Can Skyroot become the SpaceX of India?

Skyroot is often compared to SpaceX, but they’re solving different problems. As founder Pawan Chandana puts it, “SpaceX is like a metro. We’re more like a cab.” While SpaceX uses large rockets to carry many satellites to common orbits, Skyroot focuses on taking a smaller number of satellites directly to the exact orbit a customer needs.

The scale is also very different. SpaceX completed around 165 launches last year, generating roughly $5 billion from launches and $12 billion from Starlink. Around 70-80% of those launches were for its own Starlink satellites. A closer comparison could be Rocket Lab, the New Zealand company that built a successful launch business without a national space program. Even then, it took nearly 20 years to reach its current scale.

SpaceX’s journey shows just how hard building a rocket company is. Its first rocket, Falcon 1, failed three times before finally reaching orbit on the fourth attempt, nearly pushing the company into bankruptcy.

Skyroot’s start has been very different. Vikram-1 reached orbit on its very first launch, and the company is targeting a growing market by taking satellites directly to the exact orbit customers need.

But calling it “the next SpaceX” has its limits. Much of SpaceX’s success comes from Starlink, which creates steady demand by filling most of its own launches. SpaceX also keeps costs low by reusing rockets. Skyroot plans to build reusable rockets too, but that technology is still being developed.

Reaching orbit puts Skyroot in an exclusive club with fewer than 10 organisations worldwide. Turning that achievement into a profitable, long-lasting business is a much harder journey.

But is a successful launch the same as a successful business?

A successful launch is a huge milestone, but it’s only the beginning. Skyroot needs several more successful missions before customers see it as a reliable launch provider. In this industry, trust is earned one launch at a time.

Demand is another challenge. Its factory can build 12 Vikram-1 rockets a year, but India doesn’t launch that many small satellites, so most of Skyroot’s customers will need to come from overseas.

Competition is intense. In India, it competes with ISRO’s SSLV and PSLV. Globally, it faces players like SpaceX, whose rideshare launches are often cheaper, even if they don’t offer custom orbits. Rocket launches are also a tough business. They require huge amounts of capital, operate under strict safety and space debris rules, and leave little room for error. Unlike ISRO, which serves a national mission, Skyroot also has to build a profitable business.

The investment opportunity in India’s space economy

Skyroot isn’t building India’s space industry alone. Companies like Pixxel, Agnikul Cosmos, GalaxEye, Dhruva Space, and Bellatrix Aerospace are building different parts of the ecosystem, from rockets and satellites to imaging and propulsion.

None of them are listed yet, so you can’t invest in them directly. For most HNIs, the closest option is Alternative Investment Funds (AIFs) that invest in deep-tech startups. Funds like Speciale Invest, which has backed several space startups, are one route, though they typically require a minimum investment of ₹1 crore.

The opportunity also goes beyond rockets. Areas like in-space services (such as removing space debris), satellite services, and space-based computing could generate recurring revenue without having to launch rockets themselves.

Finally, keep an eye on the government’s role. Almost every founder in the sector wants the government to become an early customer, not just a regulator, much like NASA supported SpaceX in its early years. If that happens in India, it could become one of the biggest catalysts for the country’s private space industry.

He wasn’t alone. Across Korea that day, ordinary investors were logging into stock forums to compare losses like casualties from the same storm. 

Some had gone all-in on a Samsung product hoping for a rebound. Others had borrowed money to invest, only to receive margin calls from their brokers as prices collapsed. Margin loans across the country had already hit a record high just weeks earlier, as more and more people borrowed to get in on the excitement.

As of July 13th, over 1.2 million retail investors in Korea had hit margin call levels, about one in every 30 adults. The forced liquidation rate had jumped from 2.1% to 10% in just weeks. What began as one person’s bad night had become a nationwide crisis.

And it had all started with just two stocks. Samsung and SK Hynix, the two companies that anchor Korea’s entire stock market, had fallen nearly 12% on June 23rd, their worst since the 2008 financial crisis, dragging the KOSPI down almost 10% with it.

Over the following weeks, the Kospi fell about 25%, the Korean Won hit its weakest level since 2009, and the exchange had to halt trading several times after sharp market declines. By mid-July, South Korea’s President Lee Jae Myung was publicly calling the stock market “unstable,” admitting it would take time to settle.

For a market known for disciplined retail investors, sophisticated financial markets, and some of the world’s leading technology companies, it was an extraordinary turn of events. It’s not the kind of market you’d expect to fall apart overnight.

So what actually caused all of this? 

It all traces back to a financial product most Indian investors have never even heard of: the leveraged ETF. And here’s the reassuring part. SEBI has never allowed this product for retail investors in India, and there’s no sign that’s changing anytime soon. Watching what unfolded in Korea, it’s hard not to feel grateful for that.

This week, we’re getting into what actually happened in Korea, what these products are, how they work, the risk they carry, and why India seems to have avoided a mistake that Korea is still cleaning up.

In this edition:

• What a leveraged ETF is, and how it’s designed to work
• Why it’s so different from the ETFs already in your portfolio
• Why it works against long-term investors, and how Korea’s markets are still feeling that
• Why SEBI has kept leveraged ETFs out of India
• What this teaches us about using leverage wisely

What is a leveraged ETF, and how does it work?

Imagine someone offers you a simple deal: whatever the market does today, you’ll get double the return. If the market goes up 1%, you make 2%. If it falls 1%, you lose 2%.

That’s essentially what a leveraged ETF does. It aims to deliver 2x or 3x the daily return of a stock or an index.

To make this happen, the fund doesn’t buy twice as many actual shares. Instead, it uses complex financial contracts like swaps and futures, agreements that track the stock’s price, letting the fund gain massive market exposure without needing to own all the physical shares directly.

This is the idea South Korea’s regulators reached for in late May. For years, retail investors had been moving money into US markets in search of better returns. To bring some of that money back, regulators launched 2x leveraged ETFs on Samsung and SK Hynix, two of the country’s best-known companies.

The idea worked, at least at first. Within weeks, products like the KODEX SK Hynix Single-Stock Leverage ETF had pulled in billions of dollars. By the middle of the year, assets in Korea’s leveraged ETFs had reached a record $45 billion. Retail investors made up 92% of the investors, and trading in these funds and the two underlying stocks accounted for more than 70% of activity in Korea’s stock market.

But the real danger in a leveraged ETF comes down to one rule: It has to reset itself every single day. To keep delivering exactly double the return tomorrow, the fund is forced to buy more of the stock when its price rises, and sell it off when the price falls. That’s a lot of buying and selling happening at the end of every trading session, and once enough money is doing this on the same stock, that daily churn stops just reacting to the price. It starts moving it.

That’s exactly what happened in South Korea. Every sharp move in Samsung or SK Hynix triggered even more buying or selling through these ETFs, amplifying the swings.

Before the launch, the index moved in a fairly normal range. Afterwards, the swings got bigger and far more frequent. To make matters worse, regulators approved both Bull ETFs, which profit when stocks rise, and Bear ETFs, which profit when they fall. Investors were placing leveraged bets in both directions on the same two stocks. A product that was meant to keep investors at home ended up making the market far more volatile.

Why it’s so different from the ETFs in your portfolio

Most ETFs sitting in your portfolio right now are refreshingly simple. Buy a Nifty 50 ETF, and somewhere behind the scenes, the fund actually holds real shares of Reliance, HDFC Bank, Infosys, and the rest. Your investment just moves alongside them, nothing more complicated than that.

A leveraged ETF plays by a completely different set of rules. Here’s how the two stack up side by side:

How leveraged ETFs become risky over time

Let’s take a simple example. You invest ₹100 in a stock. It goes up 2% on Monday, so your investment becomes ₹102. On Tuesday, it falls 1.9%, bringing it back to about ₹100.06. After two days, you’re almost back where you started.

Now imagine you invested the same ₹100 in a 3x leveraged ETF. Monday’s 2% gain becomes 6%, so your investment grows to ₹106. Tuesday’s 1.9% fall becomes 5.7%, bringing it down to about ₹99.96.

The stock ended slightly higher than where it started. The leveraged ETF ended slightly lower. That’s because it resets every day, and small, repeated swings can slowly turn into permanent losses over time, a phenomenon known as volatility decay.

This is what investors in South Korea experienced. SK Hynix, the stock itself, continued to rise after the leveraged ETFs were launched. But the leveraged ETF tracking it was down by about 45%. The company kept doing well but investors in the leveraged ETF didn’t.

A similar story played out during the 2020 COVID market crash. The S&P 500 fell by about 34% from its peak to its trough. Because of daily compounding and amplified losses, UPRO, a real 3x leveraged S&P 500 ETF, fell by roughly three-quarters of its value over that same stretch.

By August 2020, the S&P 500 had already recovered all of its losses and was making brand-new highs. UPRO was still down more than 30% from its previous peak. The underlying market had fully recovered, but the leveraged ETF hadn’t.

And there’s one more risk. If the underlying index falls by just over 33.3% in a single day, a 3x leveraged ETF is effectively wiped out to zero. Once an investment hits zero, there might be nothing left to recover. 

That’s why leveraged ETFs are fundamentally different from ordinary investments. With standard index funds, time is your ally, and it helps you recover from downturns. With leveraged ETFs, the longer you stay invested through a highly volatile market, the harder that recovery becomes.

Why doesn’t SEBI allow this in India?

SEBI has never approved leveraged or inverse ETFs for retail investors, and there’s no sign that’s changing anytime soon. It might look like an obvious cautious regulatory approach, but there’s likely more to it.

India has already seen what happens when retail investors get easy access to leverage. Take the futures and options market. It’s a different product, but it’s built on the same idea of using leverage to make bigger bets.

SEBI’s own study found that 91% of individual traders lost money in FY24, and 93% lost money in FY25. Together, they lost more than ₹2 lakh crore. Even after losing money, more than three out of every four traders came back and kept trading.

When you compare that with South Korea’s leveraged ETF story, you can see why regulators would be concerned. Both products appealed to retail investors with the promise of bigger returns, and in both cases, the majority ended up losing money.

What should you actually take from this?

Leverage isn’t inherently bad. It just isn’t designed for most long-term investors. Leveraged ETFs can be genuinely useful for an active trader with a short-term view. They let you amplify returns, hedge positions, and gain leveraged exposure without opening a separate margin account.

But those benefits come with equally large risks.

The same leverage that boosts gains can magnify losses. Daily resets can slowly erode returns, even when the market isn’t crashing. And in extreme cases, a single bad day can wipe out your investment. When you look at the pros and cons together, one thing becomes clear: these products are built for people who watch the market every day, not for investors who buy and hold for years.

In summary

South Korea learned about the risks of leveraged ETFs the hard way, through a real crash, billions in real losses, and a regulator publicly admitting he wished he’d stopped it sooner. India may not have needed to learn that lesson at all. SEBI chose not to open these products to retail investors, and in hindsight, that decision looks like exactly the right call.

Leverage has its place, but it isn’t meant for everyone. For most investors, wealth is still built the same way it always has been: by staying invested, being patient, and letting compounding do the quiet work it’s always done best.

Before I sign off 

Last week, I launched my book, The Millionaire Employee. It’s built around an idea I feel strongly about: equity and ESOPs are becoming one of the biggest wealth creators for India’s professional class, not just its founders. Yet most employees still don’t have a good enough understanding of how they work or how to make the most of them. As a result, they’re often missing out on significant wealth.

If you’ve ever wondered how to evaluate an ESOP offer, when to hold, when to exit, or how ownership can change your financial trajectory, this book walks through all of it.

You can grab a copy here

Disclaimer – Investment in the securities market is subject to market risks, read all the related documents carefully before investing. The information provided herein is intended solely for educational purposes and should not be construed as solicitation, advertising, or providing any financial or investment advice or an offer to buy or sell any financial instruments. Readers are advised to consult with their financial advisor before making investment decisions based on the information provided herein. In this material, Dezerv has utilized information through publicly available sources, and other data deemed to be reliable. While reasonable care has been made to present reliable data in this article, Dezerv does not guarantee the accuracy or completeness of the data. Dezerv, along with its directors, employees, or partners or any of its affiliates, shall not be held liable for any loss, damage, or liability arising from the use of this document. All trademarks, logos, and brand names mentioned are used for identification purposes only and do not imply endorsement or recommendation.

Around three years ago, I started writing about ESOPs online, mostly because I kept meeting accomplished people with meaningful equity and no real framework to think about it.

If you’d told me then that this would turn into a book, I’d have laughed. But for the last two years, I’ve spent most Sundays pulling everything I’d learned into one place, because no ESOP holder in India should have to piece this together from scattered blogs, random reddit threads or feel awkward asking their seniors basic questions.

That instinct today became a book called The Millionaire Employee.

You see, ESOPs aren’t an abstract subject for me. They’re the reason I’m sitting here writing this at all. I joined IIFL Wealth (now 360 One WAM) in 2008, and equity was something I barely thought about. Then, in 2019, it turned into real money, and the first thing I did was pay off my home loan. If you’ve ever had an EMI eating into your salary every month, you know what that relief feels like.

Paying off that loan did more than clear a debt. It gave me the confidence and capital to start Dezerv with Vaibhav and Sahil, which today has over 600 employees.

For any employee, ESOPs could end up creating a lot of wealth. But the outcome depends on a few important decisions, understanding what you’ve been granted, knowing when to exercise, when to sell, and when to hold. Most people never learn these things until it’s too late.

That’s why I wrote this book, to put everything you need to know about ESOPs in one place.

And today, I’ll walk you through it, chapter by chapter, giving you a glimpse of what’s inside and why each chapter exists. If you have ESOPs today, or you might get them in the future, this is something you need.

Let’s begin.

Chapter 1: The rewards of ownership

ESOPs weren’t invented by a startup. They came out of the Great Depression, when investment banker Louis Kelso structured the first leveraged ESOP buyout for Peninsula Newspapers Inc. in 1956, letting employees buy the company using its own future profits. The US formalized the structure through ERISA in 1974.

In India, Wipro introduced ESOPs in the mid-1980s, but Infosys is really the torch-bearer, launching its Employee Stock Offer Plan in 1994 and setting the template India’s IT and financial sectors would follow for the next two decades.

Today, ESOPs in India represent a ₹14.2 lakh crore opportunity, about 22% the size of the mutual fund industry. IPOs and buybacks have created life-changing wealth overnight for most Indian employees. Swiggy’s IPO created over $1 billion for employees, and companies like Zomato, Nykaa, Policybazaar, Paytm, and Flipkart have done the same for thousands more.

We saw something similar at Dezerv during our 2024 ESOP buyback. Some employees sold their shares, while others chose to hold on because they believed the company’s future was worth more than the cash they could receive that day. 

That’s what ESOPs really are. They’re not just another part of your salary, they’re a chance to own a part of the company and share in the value you help create. 

Chapter 2: More than a salary : How ESOPs build wealth

I know dozens of people who built real wealth through ESOPs, yet very few truly understood what they owned. Most only learn the details when they’re forced to make a big decision, and by then it’s often too late to change the outcome.

Here’s the simplest way to think about an ESOP. It’s like booking a Coldplay ticket months in advance at today’s price. You pay ₹1,000 now to lock that price in. If tickets later sell for ₹5,000, you’ve won big. If they drop to ₹500, you simply skip it and buy a cheaper one instead. That locked-in price is your exercise price, sometimes also called the strike price. 

The actual ticket price on the day of the concert is the share’s fair market value (FMV). Your profit is just the gap between the two.

Face value is a completely different number, and it’s the one most people confuse. It’s just a small, fixed number stamped on the share when the company was first set up, usually ₹10. It never changes, no matter how big or valuable the company becomes later. 

Then comes vesting, the process of earning your ESOPs over time. Most companies follow a four-year schedule with a one-year cliff. A cliff is simply the minimum time you must stay before earning anything. A one-year cliff followed by monthly vesting is common, but the schedule matters. Two employees with almost the same tenure can end up with very different vested shares simply because their companies structured vesting differently. 

So, reading the fine print matters more than people realize. To make this easier, here’s a snippet from the book that shows a simple comparison of employee-friendly and unfriendly ESOP terms, so you can benchmark your own offer.

One more thing to remember: ESOP is often used as a catch-all term, but companies may actually be offering different kinds of equity.

• ESOPs / Stock Options: You get the right to buy shares later at a fixed price (exercise price).
• RSUs: You receive actual shares when they vest; no purchase required.
• ESPPs: You can buy company shares at a discount, often 10–15% below market price.
• Phantom Shares: You don’t own shares, but get a cash payout linked to the company’s value.

Each works differently and can lead to very different risks, rewards, and taxes. If your offer letter just says ESOP, ask which type of equity it actually is.

Chapter 3: Grant phase: The first step to ESOP ownership

Every ESOP eventually moves through four stages: grant, vesting, exercise, and finally, the sale.

Grant is where all of it begins, and it’s also the stage people take least seriously, mostly because it feels like a formality rather than a decision. It rarely is.

A young COO I know accepted a lower salary in exchange for ESOPs at an early-stage startup. He spent more than two years helping build the company, but his grant letter never arrived. Every time he asked, he was told it was “just a formality.” When he eventually left, he had nothing.

The lesson is simple: if you don’t have a signed grant letter, you don’t have ESOPs.

Your grant letter should clearly mention the number of options, exercise price, vesting schedule, exercise window, and other key terms. These details decide what you own, when you can buy your shares, and what happens if you leave the company.

This chapter also decodes a real grant letter, so you know how to read a grant letter and what to check before you sign.

Chapter 4: The exercise decision: When to convert your ESOPs.

A friend once had just 90 days after leaving his company to decide whether to exercise his ESOPs. The exercise cost and taxes came to nearly ₹15 lakh, almost all his savings.

Exercising an ESOP involves five steps: confirm your options have vested, submit the exercise request, pay the exercise price, pay tax on the difference between the exercise price and the FMV, and receive your shares. For example, if you exercise 1,000 options at ₹50 when the FMV is ₹200, you’ll pay ₹50,000 to buy the shares and owe tax on a ₹1.5 lakh perquisite gain.

There’s a full decision-factor checklist for exercising ESOPs in the book to help you think this through calmly instead of under a countdown. 

The real question is whether the risk is worth it. Startup valuations can fall sharply, as we’ve seen with companies like Byju’s, Oyo, and PharmEasy. Before you exercise, ask yourself if the potential reward is worth the capital and tax you’ll have to commit.

Chapter 5: From paper to prosperity : Navigating Liquidation

ESOP wealth becomes real money in four ways: buybacks, strategic sales, private secondary sales, and IPOs. Each offers liquidity differently

A buyback is when the company buys shares from employees, giving them a chance to cash out. Razorpay, for example, has completed four buybacks worth over $85 million, benefiting nearly 650 employees.

A strategic sale is when another company acquires the business. Employee shares are usually bought as part of the deal, and sometimes even unvested ESOPs vest early. Flipkart’s sale to Walmart led to about $800 million in ESOP payouts.

A private secondary sale lets employees sell their shares to private investors before an IPO or acquisition, without waiting for a larger liquidity event.

An IPO lets employees sell shares on the stock market, but not always immediately. Lock-in periods often apply. When Zomato’s lock-in ended in 2022, the stock fell over 11% in two days as employees and early investors sold their shares.

But before you celebrate that liquidity event, there’s one stakeholder that always gets paid first: the tax department.

Chapter 6: The hidden cost: Mastering ESOP taxation

One of the biggest surprises with ESOPs is that you’re taxed twice, at two different stages.

The first tax comes when you exercise your options. The difference between the FMV and your exercise price is treated as a prerequisite, added to your salary, and taxed at your income tax slab, even though you haven’t sold a single share. If your gain is ₹1.5 lakh and you’re in the 30% tax bracket, you’ll owe tax before you’ve received any cash.

The second tax comes when you sell the shares. Sell soon after exercising, and the gains are taxed as short-term capital gains. Hold them longer, and you may qualify for long-term capital gains tax of 12.5%, which can be significantly lower. Understanding these two tax events, and planning for them, can make a meaningful difference to your final returns.

Chapter 7: Timing your ESOP exercise

“Should I exercise now or wait?” is probably the most common ESOP question I get. And the answer depends on the numbers.

Take the same 1,000-share grant with a ₹50 exercise price, eventually sold at ₹8,000 ten years later. Exercising every year as your shares vest, exercising everything after full vesting, or waiting until a liquidity event all lead to different outcomes. In this example, waiting until the liquidity event actually delivers the highest post-tax return because you avoid locking up your money and taking valuation risk.

But there’s no one-size-fits-all answer. Early exercise gives you ownership sooner and can spread out taxes, but it also means committing your own money years before you know if there’s an exit. Waiting reduces that risk, but only if a liquidity event is likely.

I’ve built an ESOP Exercise Strategy Calculator into the book. You can enter your own grant details, tax bracket, and assumptions to compare different strategies and see what works best for you.

Chapter 8: Beyond the windfall: Transforming ESOP liquidity into financial freedom

When an early Urban Company employee received his ESOP payout, it was more than he had saved in all his previous working years combined. He paid off his home loan within days. “It wasn’t just financial freedom,” he told me, “it was mental freedom.”

What you do next matters just as much as the payout itself. Some people diversify across different assets, reducing the concentration risk they had in a single company. Others put most of the money into one property or one stock, replacing one concentration risk with another.

The size of the payout was never the differentiator I observed. What decided the outcome, every time, was the plan for the first few months after the money landed, before the excitement wore off and old spending habits crept back in.

Chapter 9: Decoding an ESOP offer

Not all ESOP offers are equal. Before you accept one, look at six things: the founders, the company’s potential, the cash-versus-equity tradeoff, the ESOP policy, how likely a liquidity event is, and the size of the market.

I learned the cash-versus-equity tradeoff the hard way. Early in my career, I chose cash over ESOPs because I had a home loan. Those ESOPs would be worth around ₹16 crore today.

It’s also worth checking the fine print. A one-year cliff, four to five years of vesting, and a 10-15% ESOP pool are common benchmarks. If your offer looks very different, ask questions before you sign.

In the book, I use this six-point framework to compare two job offers, one with higher cash and lower ESOPs, the other with lower cash and higher ESOPs, to show how to evaluate them step by step. I’ve also included an ESOP Evaluation Score Sheet so you can assess your own offer instead of relying on gut feel.

A note to every ESOP holder

When I joined IIFL Wealth in 2008, the markets were in a recession, and ESOPs were just something I didn’t really understand. A lot has changed since then. Startups are bigger, ESOP policies are more employee-friendly, and we’ve seen many success stories. 

But we’ve also seen the other side. Companies like Byju’s showed that paper wealth can disappear just as quickly as it’s created. ESOPs can create significant wealth, but they also come with risks. Taxes, vesting, lock-ins, and falling valuations can all affect your payout 

Here’s what’s concerning. In a survey of nearly 1,000 employees across corporate India, most people admitted they didn’t fully understand their vesting, taxes, or what would happen to their ESOPs if they left. Even employees holding over ₹1 crore worth of ESOPs said they were only somewhat confident about how their equity worked.

So if you take away one thing from everything I’ve shared today, let it be this: you owe it to yourself to actually understand how your ESOPs work, whether you just received your first grant or you’re sitting on a windfall you’ve been waiting years for.

That’s the one thing I hope this book helps with.

The Millionaire Employee is out now. Get your copy here

Disclaimer – The information provided herein is intended solely for educational purposes and is as on date of the document. In this material, Dezerv has utilized information through publicly available sources, and other data deemed to be reliable. Readers are advised to consult with their financial advisor before making investment decisions based on the information provided herein. All trademarks, logos, and brand names mentioned are used for identification purposes only and do not imply endorsement or recommendation. Dezerv, along with its directors, employees, or partners or any of its affiliates, shall not be held liable for any loss, damage, or liability arising from the use of this document.