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Falling rupee, weak US stocks give Indian investors chance to diversify

A fruit vendor counts a wad of Indian Rupee currency notes for payment at his roadside stall in Mumbai on July 19, 2022. - The Indian rupee fell to more than 80 per US dollar for the first time on record on July 19, as the greenback extended its rally and foreign capital outflows intensified. (Photo by INDRANIL MUKHERJEE / AFP) (AFP)Premium
A fruit vendor counts a wad of Indian Rupee currency notes for payment at his roadside stall in Mumbai on July 19, 2022. - The Indian rupee fell to more than 80 per US dollar for the first time on record on July 19, as the greenback extended its rally and foreign capital outflows intensified. (Photo by INDRANIL MUKHERJEE / AFP) (AFP)

Overseas spending in shares and debt jumped 8.2% to $82.5 million in May, even as the overall remittances flowing out of India remained flat at $2.04 billion, the latest bulletin by the Reserve Bank of India (RBI) showed.

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Investment by Indians in international equities and debt is gaining pace as the rupee struggles to keep up against the US dollar and weak global stock markets open up avenues for investors looking to diversify portfolios. Overseas spending in shares and debt jumped 8.2% to $82.5 million in May, even as the overall remittances flowing out of India remained flat at $2.04 billion, the latest bulletin by the Reserve Bank of India (RBI) showed.

Such investments made up 4% of overall outward remittances in May. However, the overseas spending on shares and equity is still lower than the peak of $104.5 million hit in March. April had seen a contraction.

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The yearly growth was more impressive. Overall outward remittances rose 63%, while overseas investments were up 58%. Outward remittances saw a sharp surge of 55% in the 2021-22 financial year.

The rupee hit its weakest level and breached 80 against the greenback earlier this week on concerns around a global economic slowdown, the US Federal Reserve hiking interest rates, geopolitical tensions over the Ukraine war, and high oil prices. As a result, the relentless selling by foreign investors opting out of the domestic markets has kept local investors on tenterhooks. However, the data suggests that Indian investors may look for better returns by investing in global stock markets instead to offset the effects of the steep devaluation.

Investments in US markets provide an essential element of geographical diversification to a portfolio, said Viram Shah, co-founder and chief executive officer at online investment platform Vested Finance. “The markets have been weak in 2022 and we have seen evidence of investors buying into the dip, especially when it comes to the big tech stocks," he said. A weak rupee also makes investing in the US more attractive, but that should not be the only reason to invest in US markets, he pointed out.

So far this year, the Dow Jones Industrial Average and S&P 500 are down nearly 12% and 17%, respectively, against a 5% decline in the domestic headline index, Sensex.

Part of the reason also lies in growing global aspirations. “The global dreams and aspirations of Indians are ever evolving and are no longer limited to foreign travel, but also higher education, investments in real estate abroad, and a higher frequency in cash remittances for their loved ones abroad," said Raj Gandhi, co-founder of DollarBull, a digital fintech platform.

With these global goals only multiplying, a weakening currency is a stronger case for Indian investors to increase their investments in overseas equity and debt, he said.

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