Economic Times, 3/4/2012
"The duty on Gold has just been doubled, looks like we NRIs can only look forward to investing in bank deposits now." This statement from my NRI brother got me thinking how come he never talks about investing in equities in India. NRI flows are largely restricted to bank deposits in India, with NRI deposits being as high as 5% to 6% of total deposits.
Now compare this to an average 1.5% to 2% of NRI investment through mutual funds or about 2% of the volumes on the stock exchanges by NRIs and we realise that most NRIs are not participating in one of the best performing asset classes in India over the long term. And more often than not, the reason simply is the lack of awareness of the process. To bridge this gap, here is a quick checklist.
Regulators permit NRIs to invest in most listed scrips (except for some restricted list by RBI) through the portfolio investment scheme route. This means that the only additional requirement for an NRI investor is to open a designated PINS bank account for investing in equity markets. A PAN card is mandatory to open an account. Further, NRIs aren’t allowed to do intra-day trading or trade on leverage.
CHOOSING YOUR SERVICE PROVIDERS
Since a designated bank account is mandatory, an investor needs to carefully choose the stock broker and the bank. Opting for an online account is most convenient. Not only can one transact at his/her own time (since time zones differ), but also get complete control over fund transfers and transactions. Some other points to consider should be branch service network, facility to place after-market orders, option to call and trade or speak to a dedicated equity dealer if required, access to equity research and dedicated customer service for nonresident Indian clients.
Ideally, your online trading account should not be restricted to only equity markets. Access to mutual funds, IPOs, listed bonds and debentures is a must to diversify your investments. Apart from the normal web-based platforms, reputed brokers also provide specialised tools and applications to track and analyse markets. These tools offer technical charts and details of specific stocks. And of course, with all of us addicted to our mobiles and iPads, a trading platform on these is a must. A mobile trading application can help investors track their portfolios better and ensure that no investment opportunity is missed even if you are trotting the globe.
OPENING AN ACCOUNT
This is what probably scares people the most. However, if the customer carefully chooses the broker, this should be a seamless process as most reputed brokers have tie-ups with banks to open PINS accounts. Additionally, regulations permit NRIs to open accounts even when they are not in India, provided the documents are attested by designated authorities abroad. The regulators have further simplified the process recently by significantly reducing the number of signatures required to open an account. Thus, it should not really take more that 8-10 days to get your account in place.
If the chosen stock broker provides access to research reports, then based on the risk profile investors should invest in a basket of quality companies across sectors. New investors should slowly scale up their investments and ideally start by investing in blue-chip companies.
If you are not an expert or unsure about which stock to buy, then consulting an equity dealer is not a bad idea. Another option for new investors is to consider investing in index exchange traded funds. ETFs not only offer the most efficient way of investing in equities but are also the best tools for passive investors looking to invest in India.
MONITORING AND REVIEW
Most online accounts offer a portfolio tracker to monitor your stock performance, returns and profits. Ensure that you review your portfolio at least once in a quarter and six months and, if required, make suitable changes in your investment strategy. I have ensured that my brother has now started investing in equities. I hope other NRIs too realise the potential of the Indian economy and start looking at shifting some of those billions in deposits to equities.
By B Gopkumar, executive vice president & head (Broking), Kotak Securities
Rajiv Gandhi Equity Scheme, Tax Saving through Rajiv Gandhi Equity Scheme, Rajiv Gandhi Equity Scheme Investment Limit, How to Save Tax Rajiv Gandhi Equity Scheme, Amount of Money likely to get invested in Rajiv Gandhi Equity Scheme, Rajiv Gandhi Tax Saving Scheme Rules, Guidelines for Rajiv Gandhi Equity Tax Savings Scheme, Rajiv Gandhi Equity Savings Scheme, Detailed clarification on Rajiv Gandhi Equity Tax Savings Scheme, Tax Planning Planners in Chennai India, Tax Planning strategies, Tax Planning Tips, Tax Planning Management, long term capital gain on sale of property, long term capital gain exemption, Tax Savings Investments, long term capital gain indexation, long term capital gain on shares, define long term capital gain