Rupee Depreciation : Is it the right time for NRI’s to invest in India?

May 25, 2012 - PRLog -- With the Rupee depreciating in the last few months to as high as 21% against the Yen, the most asked question is, “Is it the right time to invest in India”.

Volatile global markets, risk aversion, Euro zone sovereignty issues, Greek debt, rupee depreciation; these are terms that the investors all over the globe have become accustomed to these days.

With equities markets giving negative returns all over the globe and the rupee depreciating by over 12% to the USD, 6% against the Euro and over 21% against the Yen, the major question crossing minds of all NRI’s, PIO’s and OCI’s is “Is this the best time to invest in India?”

The Indian stock markets because of several reasons have underperformed the global markets as well as the emerging markets to a certain extend because of which investors are seeing negative returns, but if an investor has medium to long term view then this is the best time to invest in India. The Reserve bank of India has already given signs that interest rates in India have already peaked and if the inflation rate stabilize and start to reduce a bit the Reserve bank of India will start reducing rates which in turn will push the bond prices up. Looking at these scenarios NRI’s have lot of investment opportunities depending on their budget and the time frame they can remain invested for.

REAL ESTATE: Indian real estate prices have been on the rise and investors have even had 100% returns in certain metro cities in the last few years. Even the great 2008 recession was not able to stop this rally for a long time. With rupee depreciating NRI’s have more purchasing power in their hands.

Investors can earn three folds from investing in properties in India. After gold property is considered to be a hedge against inflation and property prices in India have more or less given 10% returns on an annual basis. These returns are much more than an average investor in the western world can hope of if they invest in their markets.

Investors can also earn from rentals from the property. With squeeze in supply over demand and the affordability factor rentals in the major metro cities is a decent income. You could easily get around 4% returns through renting your property and with luck favouring or with prime location the returns can increase to 5%.

With the rupee depreciating to the extend it is in the coming few months or years even if the reversal is half of what the rupee has depreciated you are still in line of getting at 6 – 7% returns because of the currency conversion. It would not be an over statement to say that investment in property can easily give you 30 – 40 returns in 2 – 3 years.

Equities: With sentiments running negative in favour of stock markets and risk aversion being the flavour of the scene an average investor is wary of investing in stocks markets. But despite all the negativity surrounding India at this moment the fact still remains that apart from China India is the only country in the world that is growing over 7% and has the potential of growing by 8 – 9 % annually. Even by the estimates of the World bank, India will grow at 7%.
This annual growth coupled with the rupee appreciation expected in few months coupled with the interest rates reduction Indian stock markets remains a destination where putting your money can give you extremely good returns in a medium to long term.

Bonds: With the reserve bank of India showing signs of start of the interest rates cycle the bond prices are expected to rise in the coning few months and it would be safe to assume that the would be offering good returns with no or very less risk. With the rupee depreciation offering currency conversion benefits these returns also can easily surpass the returns that investors can earn in the western world.

NRE Term deposits: With the Reserve bank of India deregulating the interest rates that the banks can offer on term deposits to NRI’s; NRI’s can gain from the high interest that India banks are offering and that too tax free.

The following investments you can refer to sites such as

www.icicibank.com
www.hdfcbank.com
http://www.NriInvestIndia.com/
http://www.NriCapital.com/
www.NHIA.org