It is gloomy for sure lately. Clouds are gathering on the horizon, but the monsoon season is crawling forward. There are fears of rising prices, volatility and flattened yields.
“Climate risk at this point is no longer a distant issue; it is intersecting with geopolitics and inflation in real time,” said an analysis in the latest NSE monthly PULSE bulletin.
Headline inflation stood at 3.9% in May 2026, but the food and beverages basket firmed up much faster, at 4.5%. The latest RBI analysis projects consumer price inflation of over 5.1% for 2026-27. At the same time, the forecast for the South-West monsoon has been revised down to 90% of the long-period average, with a 60% probability of a rainfall deficit. When erratic weather acts as a supply-side shock to agriculture, everyday consumption costs typically face prolonged upward pressure.
The other factor influencing your money is the volatility of financial markets. Foreign portfolio investors continue to pull money out of India, driven by global uncertainties and a weak rupee. They are rallying behind businesses influencing the artificial intelligence-driven technology ecosystem. Profit growth in the US is so strong that US-based investors need not look elsewhere. Strong demand and investment by major corporations are keeping US interest rates high. The tepid profit growth in India gives no reason for large US-based institutional investors to invest abroad.
Kotak Securities, which actively caters to institutional investors, notes that for global capital allocators focused on pure value, indices like China's Shanghai Composite or Brazil's Bovespa (IBOV) offer significantly cheaper absolute entry points, trading at price-to-book (P/B) ratios that are nearly half India's 2.9X premium. That clearly means FPIs are in no hurry to return to India.
What does it mean to you?
All indicators point to little or no change in interest rates and upward-moving consumer price inflation. That means you cannot just keep your money in bank deposits alone and focus only on savings. You will have to create an appropriate asset allocation plan to ensure that future high prices of goods and services do not pinch your household spending.
While systematic investment plans continue to see inflows from households, the ratio of discontinued SIPs to newly registered SIPs moderated to 96.3% in May 2026, down from 100% in March and April. When share prices fall, you tend to accumulate more units through the rupee-cost average method. It makes sense not to discontinue the automated investment plans. That assumes these are equity-linked plans for your long-term goals, such as retirement and your child’s professional education.
There is significant interest in fixed-income instruments. You want to look for a guaranteed return from a reputable institution that is higher than your regular recurring deposit or bank fixed deposit. The benchmark for returns is the yield on Indian 10-year government bonds. It rose above 7% amid rising uncertainty in West Asia. However, with signs of peace and normalcy in global financial markets, it is now below 7%. The RBI held interest rates but made no ‘hawkish’ comments when it announced the credit policy earlier this month. That indicates interest rates are probably near their peak. The impact is that you need to find the best fixed-return deposit with a reputable company or institution and lock in the interest rate for the short term.
Gold, your other favourite asset that continues to command a safe-haven status, is increasingly straining India’s external account. If you hold it in physical form for long, you also face storage safety risks, insurance expenses, making charges and resale penalties. You may want to hold it in digital form based on your asset allocation plan. It is a good idea to keep gold as a small portion of your diversified assets.