Investment options for NRIs in India in 2022

The investment universe has evolved at a rapid pace over the past two decades. During this period, Non-Resident Indian (NRI) investors have been exposed to a roller coaster experience when it comes to their investment options and opportunities. The decade started with the dotcom bubble, followed by the 9/11 attacks, then the 2007-08 financial crisis, the real estate downturn, the Eurozone debt crisis, Brexit and currently the Covid-19 pandemic. These events and many other related events have caused many bouts of volatility in the financial markets, leading to a sharp revaluation of investment asset classes. The immediate question that arises in everyone’s mind is: have long-term investors lost their investments in these years? The answer is an emphatic no.

Diversified portfolio

The golden rule of wealth building and investing is to have a diversified portfolio of investments with the ability and flexibility to mitigate risk. This requires being proactive with your financial investments and taking corrective action on your long-term investment goals and market outlook. Significant overexposure to an asset class has the potential to erode wealth much faster compared to a well-diversified portfolio. A typical example of this is term bank deposits. Over the past few years, they have given very low returns and their inflation-adjusted returns have actually been negative. Diversification is therefore the name of the game that provides the answer to “Why invest”.

Stock markets performed very well last year, offering average returns in the 20-25% range in many categories.

– Krishnan Ramachandran, CEO, Barjeel Geojit Financial Services

The time spent on investments is more important than the timing of your investment. The financial markets offer a limited window of opportunity to investors, regarding the timing of your investments, which should be taken advantage of by allocating lump sum capital followed by a gradual systematic investment strategy. The question of “When to invest” is an ongoing process that depends on investment objectives and opportunities. For example, the start of 2021 presented NRIs with a good opportunity to invest in exchange-traded funds (ETFs) related to real estate (REITs) and commodities. These asset classes generated returns of around 30-40% in 2021.

The debatable question in an investor’s mind is: which asset classes are good for investing in 2022? Stock markets performed very well last year, offering average returns in the 20-25% range in many categories. However, the lingering doubt that comes to an investor is – will this trend continue? What should be the ideal asset allocation model for NRI investors?

Equity

The majority of global equity markets are now trading near their all-time highs. Valuations in many sectors and companies look a bit stretched in India and globally. The key to success this year will depend on selecting stocks that are likely to generate good or better returns. The IPO pipeline in India is also very good and it will be worth investing in IPO shares that are reasonably priced from the perspective of NRI investors.

Mutual fund

This asset class offers an excellent opportunity to diversify investments between asset classes – equities and debt. Now is the perfect time to get into multi-asset, flexi-cap, balanced and hybrid funds. Systematic allocations to large, small and mid-cap funds have the potential to generate good long-term returns.

Fixed deposits and bonds

Interest rates are expected to rise in the second and third quarters of 2022. The timing of rate hikes will provide the opportunity to allocate funds in this segment.

Other options

These include gold (precious metals), life insurance, commodities, real estate-backed investments and structured products. Some of these investments are for sophisticated investors and require careful study and risk assessment.

Overall, the year 2022 should be viewed with some cautious optimism for NRI investors. Macroeconomic growth fundamentals appear to be stabilizing globally, however, impending rate hikes due to persistent inflationary indicators could cause markets to temporarily rally this year. ●

The author is the CEO of Barjeel Geojit Financial Services

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