Banker Uday Kotak highlighted the risks of relatively high stock valuations in India. "Should we continue encouraging retail investors to keep buying? Retail investors in India are funneling money into equities daily, contributing to domestic institutional flows. Money from individuals from Lucknow to Coimbatore is flowing to Boston and Tokyo," he said, noting that foreign companies were taking advantage of high valuations to book profits and repatriate funds. He continued "India's external account has three key components: foreign portfolio investment (FPI) at $800 billion, foreign direct investment (FDI), including both listed and unlisted capital, at close to $1 trillion, and $700 billion in external commercial borrowings. This brings the total repatriable capital stock to $2.5 trillion, while forex reserves - net of RBI's forward short positions - stand at $560 billion. India has seen exits from both FPIs and FDI. Companies like Whirlpool and Hyundai are reducing their holdings in Indian arms due to high valuations. In the financial sector, Prudential is looking to sell its stake in Prudential ICICI AMC through an offer for sale. "This $2.5 trillion has the potential to leave. Of course, not all of it will, but could 5% exit? Could $100 billion flow out in a year? We have seen that happen before. In such a scenario, two things could happen - RBI depletes its reserves, or the rupee weakens. I believe we could see a mix of both outcomes." *BayFort Comments:* We believe that with the potential appreciation of the USD against the Rupee, now is an opportune time to convert to USD and invest in global assets.