Falling Rupee – Why NRIs Should Invest NOW

In last 5 years the Indian Rupee has been on a downward slide and currently it is all over the news as it touched its all time low against USD. People over social media forum jokingly update their status as “rupee has entered the senior citizen club”.

The depreciation of rupee has its own impact – the import has become expensive resulting in inflation in the country, foreign travel and education have become expensive, International investor sees losses in their holding and current account deficit widen as import of oil and gold has become expensive. But depreciation of rupee gives incentive to NRIs to repatriate money in India as they get higher Indian bucks for every dollar they remit.

In last 3 months, Indian Rupee has depreciated by 9.68% and in last 5 years Indian rupee has depreciated by whopping 38.71%. For example, on 30th June 2008, if one would have remitted USD 1,000 to his/her relative in India, he/she would get the equivalent of Rs. 42,920. However, if the same transaction had been done as on 30th June 2013 it would fetch him the equivalent of Rs. 59,534, an additional amount of Rs 16,614. Thus the additional bucks are why remittances to India have sharply increased in the last few months.

Now let’s cover how as an NRI, one can take advantage of this fall by routing investment in various investment vehicles:

Bank Fixed Deposits:  Fixed deposit rates in India are attractive as compared to the developed world. NRI’s can look at investing in NRE Term deposits. Presently, the State Bank of India (the largest bank in India) is offering 8.75% interest rate on NRE deposit for 1 year to 10 years tenure. Moreover the return is completely tax free. Hence the high interest rate and the additional tax benefits as well as complete repatriable option, surely makes it an attractive investment option.


Corporate Fixed Deposit: NRI can also invest in Non-convertible debentures (NCDs) as well as fixed deposits of a company incorporated in India on a selective basis. Normally company deposits provide higher interest rate than bank fixed deposits.

Debt Mutual Fund: NRI can invest in a domestic debt mutual fund ranging from Liquid fund (very short term) to Long term Income & Gilt funds. In the current scenario, when interest rate is falling, bond / gilt funds are ideal investment option for 1 year to 15 months. In addition to generate accrual income (coupon) they generate capital gain as rates falls. In last 1 year, income funds have given returns in the range of 12 – 15%. Moreover it offers indexation and double indexation benefits if planned timely.

Equity Market:Equity shares represent an ownership in a company. An NRI can look at investing in stock market either by buying stocks directly or can invest through Mutual fund.  Indian economy is among the fastest growing economy in the world however the Indian equity market were flat for last 5 years with Sensex still trading at early 2008 levels even though the earning of companies has increased by 50% to 60%. Hence from the valuation perspective, Indian equity market has become very favourable. For NRI, the Indian equity market is even cheaper as rupee has depreciated by around 40% in last 5 years. Over next 3 to 5 years, NRI investor can make money in Indian equity market by two ways – Firstly it can be through price appreciation in equity market and secondly through appreciation in currency. However one must remember that equity as an asset class can be volatile and risky in the short term but is expected to deliver best returns over long term. Investors looking to invest in Equity market can look at parking money in debt fund and stagger their investments in equity market over next 6 months to 1 year.

Real Estate: Many NRIs would like to buy a house in their home country or want to purchase flat for their parents. Hence with rupee falling it could be ideal time to pay the down payment and purchase a property. However one must also keep in mind that favourable exchange rate will not stay forever, and one should ensure that he will be financially equipped to continue paying EMI for the complete loan tenure even if rupee appreciates over medium term. NRIs who already have outstanding loan on their current real estate investment, can look at making some prepayments at current juncture as they are getting more bucks for every dollar.

Conclusion:To conclude it is a very good time for an NRI to repatriate money to India as rupee has depreciated substantially over last few years and more specifically over last 1 quarter. However it is also important to carry out the necessary due diligence before selecting any investment avenues. One must be aware of his risk appetite and time horizon before zeroing on an asset class.


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