Indians have invested $1.53 billion in debt, equities and bank deposits through the LRS since the pandemic-induced lockdown in March 2020, the highest since 2004-05 when the window was introduced, data on outward remittances released by the central bank showed.
Investment advisors say this trend could accelerate with brokerages such as ICICI Direct and HDFC Securities facilitating direct investments, and mutual funds offering schemes that buy overseas stocks such as Facebook, Alphabet (Google) or Amazon.
“A combination of factors triggered interest among resident Indians to invest in global securities during the pandemic,” said Vijay Chandok, managing director at ICICI Securities. “While diversification of assets prompted them to look overseas, the growth story of new-age companies too was a draw-card. Moreover, investors drew comfort from the familiarity of investing into companies whose platforms they have been using or reading about – like Google, Facebook or Amazon.”
Under the LRS, all resident individuals, including minors, are allowed to freely remit up to $ 250,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. These include capital account transactions such as investment in debt/equity instruments, deposits and purchase of properties. The permitted remittances also include most current account transactions like expenses on travel, studies, maintenance of relatives, gifts and donations.
“A lot of Indian brokers have started to offer the easy facility of investing abroad through tie-ups. The new class of investors post the pandemic beginning has seen the way tech stocks abroad (mainly US- Nasdaq) have performed and want to participate in that up-move,” said Deepak Jasani, head of retail research – HDFC Securities.
As global economic activity started picking up, so have the investments in equities and debt securities. They more than doubled to $171 million during April-June’21 compared to $84 million in the same period a year ago. Also, investments in deposits rose sharply during the period.
Financial players have launched technology initiatives to take outward remittance services to the country’s micro-markets. Emkay Global Financial Services recently tied up with Stockal – a global investment platform – to help its clients invest in US-listed stocks and securities.
“Diversification is critical as it reduces risk and helps optimise the gains,” said Ashish Ranawade, Head of Products, Emkay Wealth Management. “The US markets, through equities and exchange-traded funds, offer one of the most interesting avenues to diversify.”
