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Fear of Recession in Europe Draws NRI Investment in India
Wednesday, June 23, 2010

Indian expatriates have started investing in their home country in a big way. Increasing job security in Gulf countries, coupled with fears of recession in Europe and North America, are prompting NRIs (non-resident Indians) to repatriate their savings to Indian assets, the most favoured being real estate, closely followed by equities and high-coupon debt. According to Capitaline database, NRI shareholding in companies like Rajesh Exports, Uttam Galva, Tanla Solutions, Graphite India and Carborundum Universal, among several other smaller companies, has gone up over the past one year.

A look at BSE scrolls reveals that NRIs have been net buyers of Indian shares since February, with April being the best month when Indian expats invested over Rs 20 crore at the net level in Indian shares. In February, March and May, NRIs invested Rs 10 crore, Rs 10 crore and Rs 13 crore, respectively; June is poised to be even better as the diaspora has invested close to Rs 17 crore in the first ten days of the month. “NRI investments back home are showing a healthy trend. Confidence level of investors is high; they are buying shares at every fall,” said Krishnan Ramachandran, chief executive officer, Barjeel Geojit Securities, a Dubai-based brokerage, servicing Indian clients.

According to Mr Ramachandran, Gulf-based investors have become a bit more bolder after fears of job losses subsided. “There is a change in the way Gulf-based NRIs are investing in Indian shares. Most of them prefer to trade in mid-cap stocks these days; they sell these stocks on gaining 5-10%,” Mr Ramachandran added. NRIs from the Gulf region account for nearly 25% of the total inflow of remittances. Apart from investments through Indian brokers, affluent investors also invest in India indirectly through participatory notes (PNs). Such investments do not disclose the name of the investor or the benefactor. Many of those who invest through PNs are based out of Europe and the US, say brokers with operations overseas.

Several Gulf-based investors had redeemed or sold their investments during the Dubai credit crisis last year. The current flow of money to Indian shares can be seen as Gulf-based investors reversing those transactions, according to investment experts. While Gulf-based NRIs are trying to benefit from investing in home markets, the Indian expats in Europe and North America are sending back their savings to preserve it in Indian assets.

“The monetary crisis in Europe and America is forcing wealthy Indians to send their savings back to their home country. This trend may continue for some time, unless there is a dramatic recovery in the West,” said Saurabh Mukherjea, head of Indian equities, Execution Noble Group, a London headquartered money manager. “Rich Indians living in Europe and America are investing in Indian equities, Indian real estate and Indian fixed deposits,” Mr Mukherjea added.

 

 

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