Why NRIs Should Invest in India

The Indian economy is growing exponentially. It is projected that India will be the largest growing economy in the coming years. In light of this NRIs can certainly gain from investment in India. The following are some expert opinions on how and why NRIs should invest in India. This is what Motilal Oswal and The Economic Times have to say on this subject

Motilal Oswal’s Assessment for NRIs

• As an NRI it can be advantageous that India is a developing country and has a thriving economy.
• The country provides short-term and long-term investment options. Once you get a feel for the basics there is a range of investment instruments available.

Motilal’s Historical Context to Investments in India

• In 2021 equity markets rose by 20%
• Fixed income instruments gave 5-6% on returns
• Gold prices decreased by 7.5%
• The real estate market revived itself after a stagnant past
• In 2022 stocks and online trading are rising sharply with IPOs

Motilal’s Options for NRI Investment

Stocks and Equity 

• Experts and analysts are predicting that the 8-year growth trend in the stock markets is about to plateau now. Returns may therefore be less than what is expected. This may in turn bring down share prices. 
• You should book profits in part and reinvest the gains in short-term debt instruments if you’re looking for the greatest short-term investment strategy for equities.
• Tech and auto stocks either in direct equity or mutual funds are likely to do exceedingly well

Fixed Income Investment 

• As inflation is rising rapidly, long-term investments are not advised. 
• Short-term debt funds would be better for 2022

Real Estate 

It is an optimal time for NRIs to purchase property in India. Prices are still low and the dollar is rising against the rupee. 

The Economic Times 

NRI Statistics

• Close to 15 million NRIs and 20 million Overseas Citizens of India (OCIs) exist. This makes Indians abroad the world’s largest diaspora.

• India receives the highest number of remittances globally, at nearly $85bn annually.

• The trade deficit has been financed by these remittances

• As of now, the majority of the money remitted goes towards the requirements of families in India

• Additional savings are used by NRIs for real estate investments

• NRIs account for 15% of annual real estate sales in metro cities (about $8-10bn)

Cautionary Note: 

However, many NRI forums center around real estate projects that are stuck and the lack of liquidity in real estate portfolios.

Many NRIs wish to diversify their investments in India but have been hesitant to do so because they sometimes lack clarity and other times lack expert guidance in managing their investments specifically in India. Another simple choice is fixed deposits, which appear to offer higher interest rates than the host nations, but exchange rate volatility offers very little chance for arbitrage.

What this means is that even if you gain substantially by investing in Indian Rupees, this may be offset by the rupee weakening against the dollar and other currencies. 

Equities in the Indian Stock market 

Any NRI’s investing portfolio in India must include equities. The following fundamental factors continue to support the investment case for India and have done so for the past 25 years:

• An impressive domestic growth profile

• The thriving and varied corporate world

• The institutional framework of an advanced democracy

• Access to capital markets is simple and transparent

• The opportunity that the Indian market presents in comparison to any other equity market globally is what makes investing in India the most alluring. 

• These opportunities exist in all cap sizes, including large, mid, and small. 

• It is especially the SMID (small & mid) cap segment of the Indian equity market that attracts bottom-up stock pickers because it has a sizable and growing number of listed companies with diverse business models and little research.

• It is possible to invest directly in Indian mid-and small-cap stocks, but doing so would require active monitoring, which many NRI investors might find challenging to do on a regular basis.

•  In this situation, consumers can rely on a professional manager’s guidance to invest through widely used products like mutual funds or separate account mandates through a PMS (Portfolio Management Service) or in an AIF (Alternative Investment Funds). Additionally, India is home to over 100 unicorns and a thriving startup ecosystem (the third highest in the world). Through AIFs, one can gain access to some of the fascinating concepts in the startup world.

Note: A Demat account is not mandatory for NRIs to invest in mutual funds in India. NRIs can download SBNRI App to choose from 3000+ mutual fund schemes in India or to ask any questions related to mutual fund investment.

Stocks can be very lucrative with the right knowledge. Daily monitoring and trading is time-consuming. Therefore investing in mutual funds, where a professional manager is doing the work for you is a more convenient option. Whichever route you choose, it is very worthwhile to invest in India. Fixed Deposits, Equity, Mutual Funds, and Real Estate can all be very profitable. NRIs should certainly invest in India.

To ask any questions related to the rights of NRIs, PIOs, and OCIs, you can download SBNRI App from the Google Play Store or App Store. You can also use the SBNRI app for investment in stock market/ mutual funds, NRI account opening, tax filing, etc. To ask any questions, click on the button below. Also, visit our blog for more details. 

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