Hot Investment Themes in India NRIs Must Not Miss
When it comes to investing in India, Non-Resident Indians (NRIs) have been primarily investing in real estate. In 2018, NRI investment in Indian real estate crossed an eye-popping $10 billion. However, more investment themes in India are looking promising for NRIs.
With 2019 being an election year, the incoming government is expected to come up with new reforms and also work towards improving economic growth. Although all sectors are expected to be impacted, specific sectors would be first among equals. NRIs can consider investing in firms operating in sectors such as Renewable Energy, E-commerce and Infrastructure. They can also consider investing in Indian equities and availing of a Portfolio Management Service. Let us check out the reasons for doing so:
In May 2017, the state-run Solar Energy Corporation of India (SECI) discovered a record low tariff of Rs 2.44 per kilowatt-hour. This meant that Solar Power was cheaper than Coal-based Thermal Power plants. NTPC sells electricity from its Coal-based Power plants at Rs 3.2 per kilowatt-hour.
India aspires to achieve Renewable Energy capacity of 227 GW by March 2022. Out of 227 GW to be achieved by 2022, 113.5GW would be from Solar, 66.65 GW from Wind, 5.98 GW from Small Hydro, 10.5 GW from Biomass and Floating Solar & Offshore Wind would make up 31 GW.
This will push India into the hallowed club of top three countries, next to only China and US, making investments in the renewable space. Presently, India is at number five when it comes to investing in Renewable Energy. Sources of Renewable Energy comprise combined installed capacity of 73 GW. This is equivalent to around 21% of India’s total energy capacity.
The government has proposed 60 solar cities and has allocated $1.3 billion for setting up 50 solar parks of 40 GW by 2020. Presently, IRR on major renewable energy projects is between 9% and 11% but is projected to rise in the future.
During the first six months of 2017, PE inflows into Wind and Solar sectors rose by 47% to touch $920 million. Even though presently there seem to be issues with respect to regulatory framework and projects being abandoned, over the long term, it is inevitable that the Renewable Energy space might be given greater importance once a new government is elected.
Infrastructure will be a key driver for India’s growth. During their boom period, emerging economies had spent anywhere between 7% and 10% of their GDP on infrastructure. Till mid-90s, India hardly spent about 3% of its GDP on infrastructure annually. But since then, one has witnessed an uptick. According to the Economic Survey 2017-18, India needs investments worth $4.5 trillion by 2040 to develop infrastructure for improving economic growth and increasing community well-being. Roads, railways, ports, power, airports and metro rails are crucial to India’s infrastructure growth.
Between FY18 and FY22, India is expected to spend Rs 50 lakh crore. Majority of infrastructure projects will be undertaken via the PPP (Public Private Partnership) model which will offer investors ample opportunities to invest.
India’s E-Commerce industry is poised to touch $84 billion in 2017. Thanks to rapid internet penetration, a fast-growing economy and robust demographics, India’s e-commerce market offers several opportunities to international and domestic retailers. India’s liberalised FDI policy, especially regarding participation of NRIs, has turned into a lucrative investment opportunity.
India’s stock market
It is believed that less than 2% of Indians invest in stock markets. Comparatively, 10% of Chinese and 18% of US citizens invest in stock markets. Therefore, one can imagine the potential that Indian markets offer in terms of growth. Average long-term growth in equities in India has been between 14% and 15%. If one is confident about stock-picking skills, then an NRI investor can look forward to creating a robust stock portfolio that can offer both capital appreciation and dividend income. For investors who may not have either knowledge or time to research about specific stocks could still take advantage of India’s growth story by investing in mutual funds.
NRIs from the US can invest in India-specific funds launched by US-based mutual funds or invest through mutual fund houses in India which allow US-based NRIs to invest across their schemes. For NRIs residing in other countries, investing in Indian stock markets or in mutual funds isn’t a difficult proposition.
According to FEMA, "an NRI is a person resident outside India who is either a citizen of India or a person of Indian origin (PIO)." FEMA also points out that a PIO is a foreign citizen of Indian origin residing in India who has held an Indian passport at any time or her father or grandfather was an Indian citizen. For investing in Indian equities, an NRI has to open either an NRE (Non-Resident External Rupee) Account or an NRO (Non-Resident Ordinary) Account or an FCNR (Foreign Currency Non Resident) Account.
Portfolio Management Service
A PMS (Portfolio Management Service) is a sophisticated investment vehicle which generates medium to long term capital growth by identifying undervalued stocks from a comprehensive list of well-researched stocks. A PMS enables an investor to rely on expert fund management service by professionals. Continuous monitoring and reporting are made available. A PMS is a viable option for an NRI looking to invest a lump sum amount of at least Rs 25 lakh and seek a competitive return on it.
Here, opening an HDFC Bank NRI Savings Account would arguably the first step for an NRI to start evaluating relevant opportunities in India. Once the appropriate investment opportunity is identified, funds can be redirected, thanks to the ease of banking with HDFC Bank.
Looking to apply for an NRI Savings Account? Click to get started!
Know more about What is NRE Account here.
*The information provided in this article is generic in nature and for informational purposes only. All information is subject to the relevant Act, Rules, Regulations, Policy Statements, and subject to change.