In this edition of ETMarkets Smart Talk, Himanshu Kohli, Co-founder of Client Associates, breaks down the key hurdles holding investors back—from taxation complexities and TCS-related cash flow concerns under the LRS route to limited awareness and operational ambiguity around global investment structures.
He also shares practical insights on how investors can approach global allocation more strategically, why rebalancing matters more than timing, and where opportunities lie across US and emerging markets in the current environment. Edited Excerpts –
Q) Thanks for taking the time out. Well, amid the gloom and doom, US markets hit a fresh record high in April. What are you advising your clients who have invested in US markets?
A) For investors who already have meaningful exposure to U.S. assets, our advice is to hold on to those investments. Selling existing U.S. holdings can trigger tax implications and, in the case of feeder funds, structural limits often make switching difficult. Instead, investors should first revisit their overall asset allocation.
If strong U.S. market performance has resulted in an overweight position, incremental allocations can be directed towards non‑U.S. markets, particularly emerging markets. While the dollar has strengthened recently due to geopolitical factors, we expect this trend to reverse over time as interest‑rate differentials likely narrow. Our analysis shows that during periods of U.S. dollar weakness, emerging markets have historically outperformed developed markets. Accordingly, rather than making abrupt portfolio changes, a more measured rebalancing approach is advisable.
Q) I am sure you must be getting calls to invest overseas. What are the major concerns which investors are more concerned about?
A) Investor concerns primarily revolve around taxation and operational clarity. Under the LRS route, many investors worry about potential scrutiny from tax authorities, as well as the impact of TCS on cash flows. Another challenge is comfort and familiarity – domestic investors are accustomed to the depth of information available on Indian managers and companies, which is not always easily accessible for global investments.
There is also lingering ambiguity around investment structures, particularly in GIFT City. Investors are not always clear whether they must invest through pooled vehicles or whether customized investment structures are possible. While taxation rules have improved significantly, apprehension around compliance and regulatory queries remain. Limited awareness about overseas investing avenues and restricted mutual fund routes further constrain global allocations, making access to global markets narrower than investors would prefer.
Q) Tim Cook announced he is stepping down as Apple CEO after nearly 15 years. Do you see this in the right direction and will it impact stock performance?
A) Leadership transitions are a natural part of the evolution of large organizations. We have seen this in several global companies as they move from founder‑led structures to professional management, and even within professional leadership teams over time. Tim Cook’s 15‑year tenure has been fairly long, so a transition brings the opportunity for renewed energy and perspectives.
With John Ternus assuming the role of CEO and Tim Cook continuing as Executive Chairman, Apple maintains continuity while enabling leadership renewal. Apple today is an institution rather than a personality‑driven organization. In the short term, leadership changes may lead to some volatility in the stock price. However, from a long‑term perspective, performance will continue to be driven by innovation and execution. Given Apple’s acknowledgment that it has lagged peers in AI, the new leadership will be closely watched for its ability to drive growth beyond hardware leadership.
Q) FAANG and the Magnificent Seven are well‑known acronyms. Is there a new one gaining traction?
A) A newer acronym gaining attention is MANGO – Meta, Apple, Nvidia, Google,and OpenAI. This reflects the market’s shifting focus from traditional consumer platforms to companies dominating the artificial intelligence ecosystem.
With U.S. markets hitting record highs, how much should investors allocate monthly to overseas stocks or ETFs?
Rather than focusing on a fixed amount, investors should evaluate their existing exposure. Those already well allocated to U.S. markets may benefit from channelling incremental investments toward emerging markets or other global opportunities. This can be done via active strategies or ETFs, depending on investor preference.
In our model portfolios, we recommended global fund‑of‑funds operating out of GIFT City, emerging market focussed active funds and select ETFs. While active managers in developed markets often find it difficult to consistently outperform indices, emerging market managers have demonstrated better scope to generate alpha, making active management a compelling option in that segment.
Q) We are in the first month of FY27. When should investors rebalance global portfolios?
A) The start of the financial year offers investors a fresh annual LRS remittance window, making it an efficient time to plan overseas investments. For those using systematic routes, starting early allows investments to be spread evenly over the year. Even quarterly investors benefit from initiating allocations in the first quarter.
That said, rebalancing decisions should ultimately be driven by asset allocation rather than timing alone. With U.S. markets at elevated levels, a staggered or systematic approach may be more prudent. Also given the volatility of emerging markets, systematic investing can help mitigate entry price risks. Beginning early in the year allows investors to build exposure gradually while managing entry risk.
Q) Which sectors are in focus in 2026?
A) We have a constructive view on select sectors. With earnings momentum in U.S. technology remaining strong, the recent drawdown offers opportunities to selectively add exposure through a disciplined buy‑on‑dip strategy. Power utilities are also gaining relevance due to rising energy demand linked to artificial intelligence infrastructure. Additionally, defence has come into focus, as geopolitical tensions have prompted many countries to raise defence spending to invest in domestic capabilities amid shifting global alliances.
Q) Any ETFs investors should keep on their watch list?
A) Our approach favours broad‑based developed market ETFs rather than narrowly defined sector ETFs. That said, thematic exposure to areas such as energy, defence and artificial intelligence can be considered. For emerging markets, we prefer actively managed funds over ETFs.
