D. Murali

Chennai, April 27: Earlier this week, ‘Liberalised Remittance Scheme’ came in form further liberalisation when the Annual Policy Statement of the Reserve Bank of India (RBI) proposed to double the present limit of $50,000 to $1,00,000 per financial year for any permitted current or capital account transaction or a combination of both.

“The increase in investment allowed from $25,000 to $50,000 in December, and to $1,00,000 now has given an Indian investor truly an opportunity in real economic terms to be able to diversify his portfolio and to a degree mitigate his risk,” says Mr Rahul Kher, Head-International Operations, Religare Securities Limited. “Till date the only opportunity available was different asset classes but all linked to Indian economy unlike the global investor who holds a global portfolio and is able to benefit from cost and markets on a global basis thereby reducing sector and market geography specific risk.”

Now an Indian investor has for the first time been able to seriously benefit from global markets and utilise his knowledge to translate the same into returns for himself, opines Mr Kher. “The move towards enhancement of the remittance limit and easing of procedures is seen as steps toward full capital account convertibility and fuller integration of Indian investors/ investments with the global capital markets. For an Indian investor, who till now could spread his/her investment risk to Indian centric investments only, this provides an avenue to invest in the biggest and the best companies from all across the world hence diversifying his risks on a global scale and at the same time participate in the profits of global multi-nationals.”

According to Mr Kher some of the advantages of investing overseas for an individual are diversification and minimising of portfolio risk; participating in international markets, which are poised for growth; and global reach for opportunities, in various countries, sectors, and companies.

“These apart, one has to also appreciate that in overseas investment, you can cover credit, currency, and transaction risks. Asset allocation modules are criteria specific. The quality of companies differs across markets, which PE (price-earnings) ratios may not capture. And in the event of a possibility of a correction and an interest rate hike at home, heading west could benefit the investor portfolio.”

The overseas investment market is led by definitive research, points out Mr Kher. “The range of investment opportunities available abroad is phenomenal, providing one with more width and depth. For instance, in India, currently duration of a derivatives contract is three months; liquidity is mostly restricted to one-month contracts. Overseas, an investor can take longer derivative contracts.”

So, what can be the advice to investors? “As a first move towards gaining international exposure and diversification an investor should invest into mature and strongly efficient markets like the US,” advises Mr Kher. But why the US? Because “US markets per se are more definitive, research led, retail investor friendly leading to less volatility, providing the much needed stability to an investment portfolio,” he reasons.

“US markets are highly regulated with SEC (the Securities and Exchange Commission) being the most stringent and global standard setting regulator in the world, lending the extra safety to investor funds. An investor can also establish a truly global portfolio, with most reputed global companies from different regions of the world being represented in the US bourses.”