I am a non-resident Indian (NRI). Are NRIs allowed to invest in Indian mutual funds? If yes, what is the incentive for people like us?
Saloni Verma, via e-mail
NRIs are allowed to invest in mutual funds in India. If the investment has to be made on a repatriable basis, then cheques will have to be drawn on FCNR/NRE bank accounts. Following which, the bank has to issue a debt certificate confirming that the amount has been paid. And if the investment is to be made on a non-repatriable basis then payment can be made out of NRO/NRSR accounts.
Since you are based abroad, Indian mutual funds may well serve your needs. A fund can offer you a diversified portfolio of debt and equity securities, or a mix of both. On the fixed income side, higher interest rates on Indian debt securities make it an attractive option compared to developed markets where interest rates are on the lower side.
Debt funds would be an ideal way to start your investment innings here. The clear differential between interest rates will also negate the impact of any adverse movement in the exchange rate. However, we suggest that you park your funds for the long-term as short-term investments won't yield much. Also, currency risk could become significant then, although the rupee is appreciating at present—something that could work in your favour.
The Indian economy is one of the fastest growing economies in the world. In comparison to other developing markets, valuations are attractive here. Also, loads are on the lower side vis-a-vis markets like the US. Among equity funds, there are a number of funds-generally focused on larger and more liquid stocks which have a good track record. Some specialised funds also court mid-cap stocks.
That apart, a few funds also give investors the option of investing on the Internet. These funds, which have a tie-up with banks such as ICICI Bank, allow electronic transfer of funds. ICICIdirect.com an integrated online trading service allows investors to purchase units of Prudential ICICI, Templeton, Alliance Capital, JM, Birla Sun Life, IL&FS, Sundaram, HDFC and IDBI Principal mutual funds on the Internet. Thus investors can carry out transaction like purchases, redemptions, switches, systematic investments and systematic withdrawals online. There is no need to write cheques, make demand drafts, fill in the lengthy forms, as all transactions are completely automatic and carried out at the click of a mouse. The units purchased are directly credited to the account of the customer. You can also receive account statements through e-mail. To keep investors posted about various developments, almost all funds provide regular disclosure of their portfolios on the Internet.