The debate around the role of systematic investment plan (SIP) inflows in the sharp depreciation of the Indian rupee has intensified after a recent note by brokerage firm Jefferies suggested that strong domestic equity flows gave foreign investors an easy exit route from Indian markets, contributing to pressure on the currency.
Responding to the discussion, veteran fund manager defended retail investing through and argued that alternative uses of household savings would not necessarily have benefited the Indian economy or the rupee.
Helios Capital founder argued that critics of SIP-driven flows were overlooking an important question — where else would Indian household savings have gone if investors had not deployed money into equities through SIPs.
“We should complete this line of reasoning,” Arora said, while questioning the assumption that lower SIP inflows would have automatically helped the or improved economic outcomes.
Arora suggested that if Indian retail investors had avoided SIPs, they would likely have diverted money into overseas investments, gold, discretionary consumption or low-yield bank deposits.
“So if Indian investors did not do SIP they could have done the following: a) Invest outside India which everyone seems to favor this month. Could not have helped the Indian Rupee though,” he said.
The market veteran also argued that investing in , which had seen strong investor interest earlier in the year, would have similarly put pressure on the rupee because of India’s dependence on imports.
He further contended that excessive spending on consumption items such as electronics, phones or dining out could not be considered superior to disciplined financial savings through SIPs.
“Kept money in the bank and earned 4-5% type net of tax returns- most SIPs would still be giving that kind of returns in the past 1-2 years,” Arora added.
Arora also addressed criticism surrounding FII exits and private equity selling in Indian equities. According to him, preventing or PE investors from exiting would likely have resulted in weaker market performance for existing retail investors while also reducing the attractiveness of India for future foreign investments.
He argued that the flow of capital through public markets had also enabled the growth of several new-age businesses that now form a part of daily urban consumption patterns.
“Plus if these new businesses (that have gone public recently due to PE selling etc.) would not have grown the way they have, you would not have been able to get a temp maid to clean your bathroom and (God forbid) you would have had to go out yourself in this 40 degree heat to get your groceries,” he noted.
What the Jefferies report said?
The broader debate emerged after Jefferies said India’s weak capital flows, rather than the current account deficit, were the key reason behind the rupee’s decline. According to the brokerage, strong inflows into mutual funds through SIPs and other domestic institutional channels helped absorb heavy foreign institutional investor (FII) selling over the last two years.
Jefferies noted that equity market-driven outflows accounted for nearly $78 billion during the past two years, as foreign investors reduced exposure to what they viewed as an expensive market. The brokerage added that strong domestic flows from SIPs, tax incentives for equity investments and higher allocations through EPFO and NPS continued to cushion Indian markets despite sustained FII selling.
Data from the Association of Mutual Funds in India (AMFI) showed that net inflows into existing equity schemes reached a record ₹38,503 crore in March 2026 and remained elevated at ₹38,410 crore in April 2026. Earlier, the previous record stood at ₹37,840 crore in October 2024.
During calendar year 2026 so far, the Indian rupee has depreciated nearly 7% against the and crossed the 96 mark, making it among the weakest-performing emerging market currencies during the period.
Meanwhile, Jefferies maintained that previous episodes of sharp rupee depreciation had often been followed by a recovery in foreign portfolio investment flows over the subsequent 12 months. The brokerage suggested that a correction in Indian market valuations, unwinding of the artificial intelligence trade and easing geopolitical concerns around the Strait of Hormuz could potentially improve capital inflows going forward.
The discussion around SIP inflows, retail participation and currency stability comes at a time when domestic investors have emerged as a key stabilising force for Indian equities, helping markets withstand prolonged periods of foreign selling pressure.
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