Investment queries: How should an NRI invest in the Indian equity market for the long term?



My Non-Resident Indian (NRI) brother lives in Africa and wants to invest Rs 35- Rs 40 lakh for the long-term in the Indian equity market. Please advise.
Adhil Shetty CEO, BankBazaar
 replies: NRIs can invest in mutual funds in India after completing their KYC (Know Your Customer), FCRA (Foreign Account TaxCompliance Act) and CRS (Common Reporting Standards) formalities. They can invest in funds that accept NRI investments either directly or via power of attorney. It’s advisable to invest in a mix of bluechip and emerging bluechip funds for decent risk-adjusted, long-term returns. You brother may consider investing in large-cap funds such as Axis Bluechip, HDFC Top 100 and Mirae Asset India Equity, and in large- and mid-cap funds such as Mirae Asset Emerging Bluechip and Canara Robeco Emerging Equities. A portfolio tilted towards large-cap funds will reduce volatility. To reduce risk, it is advisable to invest via systematic transfer plans over the next six months.

I am a retired engineer and I want to invest Rs 42 lakh to earn a monthly income of Rs 25,000. Please advise.
Prableen Bajpai Founder, Managing Partner, FinFix Research & Analytics 
replies: A return of 7.25% on Rs 42 lakh will earn you a monthly income of Rs 25,000. But you also need to account for inflation and tax. You can invest Rs 15 lakh in Senior Citizens’ Savings Scheme (SCSS) which currently offers a pre-tax return of 8.7%. SCSS offers a quarterly payout of interest instead of a monthly payout. The remaining Rs 27 lakh can be invested in a combination of secured Non-Convertible Debentures (NCD) and corporate fixed deposits.

While these products offer better returns compared to fixed deposits, they come with some risks too. Opting for NCDs from credible issuers can reduce the risk to a great extent. So, look at the credit rating and repayment history of the issuer before you invest in NCDs. While tax is deducted at source for SCSS and corporate fixed deposits, it is not deducted for NCDs. Overall, factor in the taxation aspect and calculate your post-tax returns while making a final choice of products.


Written by Loknath Das