Foreign investors may be warming up to Indian markets again, but only if the ground shifts beneath their feet first. That's the broad takeaway from Asit Bhandarkar, Senior Fund Manager at JM Financial AMC, who says two things need to happen before foreign institutional investors (FIIs) meaningfully re-engage with India: the rupee needs to stabilise, and the government needs to show it's willing to meet investors halfway.The rupee problem nobody's talking about loudly enoughWhile markets cheered a 1-1.5% uptick amid reports of possible tax relief for foreign investors in debt instruments, Bhandarkar was measured in his optimism. The bigger structural issue, he argues, isn't the tax headline, it's currency volatility."One of the reasons why FIIs have been shy of India is because the currency has been fairly volatile and weak," he said. For long-term structural investors seeking diversified emerging market exposure, an unstable rupee is a dealbreaker before any conversation about returns even begins.The government, Bhandarkar noted, has been consistent in its stance: it won't dictate the rupee's direction or value, but it does want to contain the pace and volatility of its movement. Getting the rupee back to fair valuation while smoothing out its swings could be enough to bring back FIIs who've been sitting on the sidelines.Banking sector: Ugly headlines, clean booksAsk Bhandarkar about financials and the answer is blunter than the cautious headline numbers suggest. Yes, treasury gains have turned into treasury losses as G-Sec yields moved sharply. That's a real dent in one part of the profit pool. But strip that out, and the picture looks quite different.You Might Also Like:Credit growth is running above 16%, asset quality remains intact, and valuations across the sector, including smaller private banks and PSUs, have not caught up with the underlying earnings opportunity. "The whole sector is not very overvalued at all," he said, adding that at current prices, the growth runway over the next year is far from fully priced in.West Asia, oil, and the market's quiet calculationOn geopolitical risk, Bhandarkar acknowledged the near-term pain from fuel price transmission, WPI is already climbing, and demand for mass consumption goods will likely soften over the next two quarters. But he also pointed to something more interesting: the market already knows this.The sharp reaction in March, followed by a relative shrug since, suggests collective market wisdom is doing what it always does — looking past the disruption toward normalcy. When crude prices and supply tightness eventually ease (and they will, even if the timeline is unclear), those elevated input costs become the new base, and the comparison numbers start working in the market's favour.It's the same dynamic that played out during COVID. Markets priced in the worst early, then looked ahead.You Might Also Like:What should investors actually do right now?Bhandarkar doesn't dress this up. Near-term volatility is coming, and investors who can't stomach it should wait. But for anyone with an 18-to-24-month horizon, the setup looks meaningfully different.Markets have gone broadly sideways for the past one-and-a-half to two years while earnings have continued to deliver. That combination — flat prices, growing earnings — means significant derating has quietly happened across the board. Some stocks are down 50-60% from their peaks."The prices are probably in favour of good stock pickers," he said. The macro will get messier before it gets better. But FY28 — a recovery year on the other side of the current turbulence — is a scenario that can be bet on with reasonable conviction today.The opportunity, in other words, is already sitting in the correction. The question is whether investors are willing to look past the next two quarters to see it.You Might Also Like: