Financial Daily from THE HINDU group of publications
Monday, Jan 16, 2006
Money & Banking
Industry & Economy - NRIs
Markets - Mutual Funds
IMD funds from Gulf may move into mutual funds
Abu Dhabi , Jan. 15
INDIAN financial instruments such as mutual funds and the booming real estate sector are expected to be the biggest beneficiaries this year, as Gulf NRIs, flush with funds after redemption of the IMD deposits, are eagerly looking out for fruitful investment vehicles back home.
Industry observers here told Business Line that there has been a substantial increase in interest evinced by NRIs in the Indian capital market, while the real estate sector is also being studied keenly, particularly by NRI investors who have not yet created assets in that sector.
Senior bank officials indicated that in the days following the redemption of the IMD, NRIs have been seeking banks' advice on suitable investment options.
The increase in interest rates compared to last year has led to a good number of them placing their funds in FCNR and NRE deposits. Many banks here have also been wooing investors with better investment rates for dollar deposits kept locally, either as monthly rolling accounts, or for a period of six months to one year.
"Investors, particularly those who are cautious about where they park their funds, have for now placed their IMD earnings in fixed deposits," said a senior official of Bank of Baroda.
However, unlike in the past, more NRIs are showing keeninterest on the Indian capital market. Mutual funds and other relatively safe options in both rupee and dollar denominated categories are finding more customers.
NRI investors are now more confident due to the consistent boom in the Indian markets and the inherent strength in the economy.
Sensing this growing confidence, many locally based MNC banks are promoting rupee and dollar-denominated funds and advising investors to look more seriously at investment options in India.
In fact, in recent months, the Indian market is being recommended by the advisors.
Market related developments coupled with strong fundamentals could ensure returns to the tune of 20 per cent per annum, even if some negative factors come into play
Mr Ramesh Krishnamurthy, Vice-President, Marketing, Barjeel Geojit Securities LLC, pointed out that there had been a substantial increase in the number of investment enquiries by NRIs over the past couple of weeks.
"I believe that a sizeable portion of the IMD funds will be funnelled into financial assets and to some extent in India's real estate," he said.
Mr Krishnamurthy indicated that post-IMD, there had been a lot of interest in diversified equity dollar and rupee funds. Mutual funds appeared to be a preferred choice for NRIs mainly due to its excellent performance in the past few years.
"Mutual funds have delivered big returns for investors in the past few years. The main advantages for NRIs are the good returns, the tax-free aspect and the repatriable factor coupled with the quick withdrawal options.
Investors are in a `win-win' situation," he said.
The clientele for mutual funds at Barjeel Geojit has increased from around 3,000 to over 12,000 in the Dubai-Abu Dhabi region alone last year and judging by the initial trend after the IMD redemption, the numbers are expected to jump this year.
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