STOCK MARKETSAnand Rathi

Superior returnIndia has been the fastest growing major economy since 2015. The country has been among the top two fastest growing countries of the world for the last 15 years.

Strong GDP growth has been the main driving force of corporate performance in India. From 1990 till date, average yearly return on Indian equities (Sensex) has been over 14% - one of the best in the world. High return is the main reason for India becoming one the most attractive destinations for foreign institutional investors (FIIs) for equity investment.

Currently nearly 20% of India’s listed equities and nearly 40% of the non-promoter equity shares are held by FIIs. Moreover, only thrice in the last three decades, net FII in�ow to India turned negative.

These clearly testify the consistency of attractiveness of Indian equities. Against this backdrop, I strongly urge NRIs from the UAE to allocate a sizeable part of their portfolios in Indian equities.

Security of investmentThere are other aspects of attractiveness of the Indian equity market as well. Among the emerging market countries,

India has one of the best regulatory arrangements, transparent screen-based trading, e�cient price discovery with large trading volume, stringent corporate governance norms and real-time surveillance to guard against market manipulation.

According to an assessment by the World Bank, India stands among the top seven countries of the world in terms of protection of minority shareholders’ rights.

Apart from attractive returns, your investments in Indian equities are secured from manipulation and arbitrary actions.

Regulation for investing in Indian equitiesAlthough India does not have full capital account convertibility for resident Indians, for NRIs, there is near full convertibility – freedom of bringing in and out equity investments – subject to conditions laid down under the applicable laws, especially Foreign Exchange Management Act (FEMA).

NRIs from the UAE can invest directly into Indian equities under the portfolio investment scheme (PIS) through an NRE/NRO account. NRIs can also invest in Indian

Opportunitiesfor NRIs in the UAE to invest in

Indian stocks

Opportunitiesfor NRIs in the UAE to invest in

Indian stocks

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equity mutual funds. India has a double taxation avoidance treaty with the UAE since 1993.

Horizon for investmentEquity markets are by nature volatile as they try to actively factor in all types of information and future perspectives. Yet, when invested systematically with a longer-term investment horizon – beyond 3 years – portfolio volatility for equity investment comes down drastically.

The objective of investment in Indian equities should be long-term superior returns rather than an attempt to make quick return, which can actually lead to substantial losses.

Direct versus indirect equity exposureWith over 5,000 listed (highest in the world) and over 2,000 actively traded listed companies, investors in Indian equities have immense choice of companies for investing.

Yet, unless a person is a professional investor, has specialised knowledge about the Indian equity market and can devote enough time to constantly track the listed companies and other developments relating to the Indian

equity market, I recommend investors to take exposure to Indian equity market through collective investment vehicles such as equity mutual fund schemes.

This o�ers the opportunity to diversify and thereby reduce the risk of large �uctuations in portfolio values. In addition, seasoned professional managers of reputed mutual funds generally generate 2-5% excess return over the bellwether equity indices such as Sensex.

Prospects for investment in Indian equitiesThe world economy is slowing down and India too is facing the same problem. This has led to correction of equity indices and low-to-negative returns on Indian equities over the last one year. Apart from global issues, we are also facing numerous domestic problems.

Yet, the growth slowdown in India is temporary. We expect the economy to start looking up substantially in the second-half of the current year. The government, Reserve Bank of India, other agencies and also companies are taking active measures to boost growth. These bode well for the medium to longer-term outlook of the Indian equities.

Anand Rathi is the Chairman of the Anand Rathi Group, one of India’s leading �nancial services company active in Wealth Management, Investment Banking, Corporate Finance and Advisory, and Brokerage and Distribution in Equities, Commodities, Mutual Funds, Structured Products and Insurance among others.

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