Julius Baer’s Sumaya says NRIs queueing up to invest in India

 Kunal Sumaya, market head-Global NRI at Julius Baer.
Kunal Sumaya, market head-Global NRI at Julius Baer.

Summary

  • Kunal Sumaya, market head-Global NRI at Julius Baer, says that the motivation for NRIs to invest in India varies, spanning diversification, wealth preservation, and retirement planning

Over time, the investment preferences of non-resident Indians (NRIs) have shifted towards a greater emphasis on Indian capital markets from the US large caps and technology stocks, pointed out Kunal Sumaya, market head-Global NRI at Julius Baer. 

“What we have observed is that a significant portion of global high networth individuals are engaging in investments in India," he said while adding that the motivation for NRIs to invest in India varies, spanning diversification, wealth preservation, and retirement planning. Edited excerpts:

From your point of view, which is the favorite investment destination for NRIs and foreign investors? How do they look at India?

From the perspective of NRIs and foreign investors, there has been a consistent uptick in investments in India year on year, fuelled by the country’s stable and genuine long-term growth trajectory. With a projected growth rate of 6.5% this year, surpassing that of any other country, and an anticipated GDP of $5 trillion by FY25, India's market is garnering increasing attention. 

According to industry sources, record-breaking FDI numbers, soaring to $71 billion in FY22-23, are expected to climb to $100 billion soon, further underscore India's allure. This interest is not confined to NRIs; global investors from Asia and Middle East are also showing keen interest. 

Last year, Julius Baer launched its maiden Equity India Fund, raising over $200 million in record time from investors across the globe, including NRIs, underlining the growing international appetite for India's markets.

The investment patterns among NRIs have evolved over time, transitioning from investments in US large caps and technology stocks to a larger focus on Indian capital markets. Overall, India's resilient economic growth, coupled with its diverse investment opportunities, firmly positions it as an increasingly attractive destination for NRIs and foreign investors, too.

Much has been said about the surge in NRI investments in Indian real estate. What growth sectors are NRIs chasing? Where and why are they parking their money in these specific areas? 

Initially, the focus for the first generation of NRIs was on traditional investments like real estate, driven by cultural ties or familial connections to the country. However, a significant shift has unfolded over the last decade, moving away from physical assets such as real estate towards financial instruments. 

This transition has been buoyed by the economic consistency and stability witnessed in the last decade, including its robust economy and thriving capital markets. What we have observed is that a significant portion of global high networth individuals are engaging in investments in India. 

First-generation NRIs are predominantly investing in equities and debt while the younger demographic is increasingly venturing into private markets and venture capital, driven by the pursuit of double-digit growth. Though the motivation for NRIs to invest in India varies, spanning diversification, wealth preservation, and retirement planning.

What is their thought process on investing in Indian equities? 

India has a stable, genuine long-term growth story—macro and micro—playing out well. The Indian equity markets have recently reached unprecedented highs, attributable to a combination of macro elements such as good governance and a robust banking system, alongside micro factors like a resilient corporate sector and healthy household balance sheets. 

Additionally, ample liquidity, fuelled by substantial domestic and expected improvements in FPI flows, contributes to the bullish sentiment pervading the equity market. To illustrate, AMFI data shows that the Indian mutual fund industry currently boasts an impressive AUM of 54 trillion, with a notable 23% growth in 2023 alone. 

NRIs are actively participating in equity investments, channeling funds into mutual funds and direct stocks across diverse sectors including technology, healthcare, consumer goods, and infrastructure.

Apart from India, what other markets excite NRIs and why?

Investment allocations are tailored to meet the unique needs of each client, considering factors such as their stage in life and their risk tolerance. For instance, our allocation for a growth-oriented client will encompass a significant portion to equities followed by bonds and cash whereas for a wealth preservation client, the allocation will differ.

Given that many NRIs are domiciled in financial hubs like London, Dubai and Singapore, apart from India, they are making investments in their home market as well as actively investing in global financial markets.

Will GIFT city open the floodgates for NRI investments in India?

GIFT City was established to be a world-class global investment destination and over the last few years, has positioned itself as a preferred destination for global investors, with many NRIs setting their sights on it.

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