Where Should UAE NRIs Invest In India?

The Indian rupee has been one of the worst performing currencies this year, hitting a record low of 68.85 per dollar last week, a 20 per cent drop from the end of 2012.

Non-resident Indians (NRIs ) across the world, especially from the GCC, have been cashing in on the falling rupee, repatriating huge amounts of money to India.

But with the Indian economy slowing down, there is heightened confusion among NRIs about lucrative investment options.

There are attractive investment opportunities across asset classes offered by the market to NRIs, said Sonalee Panda, head of Private Banking & Wealth Management at ING Vysya Bank.

On the fixed income side, Panda recommends bank deposits.

“NRIs have two options – NRE (non-resident external) deposits and FCNR (B) (Foreign currency non-resident) deposits. With deposit periods ranging between one to five years, the principal and interest on these deposits is fully repatriable and the interest earned on these deposits is tax-free in India,” she said.

The equity market has also corrected quite significantly in the recent past, stated Panda.

“Hence it is an ideal time to initiate exposure to Indian equities either through direct equity or mutual fund route,” she said.

“The alternate asset class, in view of strong price performance, particularly in real estate and gold over the last three years, is not relatively looking attractive as compared to tax-free fixed income options and equity,” she added.

However, Surendran A, head of Retail and International Banking at India-based Federal Bank, is not so bullish about the Indian market.

“Right now, no asset class is expected to be a multi bagger. The economy is in a bad shape. Stocks look to go down further. Real estate is yet to show recovery. Gold is having its own uncertain period,” he explained.

“On best returns to NRIs, I suggest bank deposits,” Surendran stated.

The Indian banking sector is founded on stable fundamentals and nobody expects any kind of loss to the depositor, even if the bank does not do well on profit making, he added.

“In all other assets, be it stocks, real estate, gold, even government bonds, the value of the asset goes down due to market influence, whereas the value of the bank deposit is guaranteed. It is also protected by several check measures like CRR, SLR, Capital adequacy etc.

“Moreover, the Reserve Bank of India (RBI), is considered to be one of the shrewdest and most effective financial controllers in the world,” he added.