Investment advisers in the UAE are reiterating their recommendation to non-resident Indian (NRI) investors to increasingly use the mutual fund route to benefit from the positive outlook for India’s capital markets.
Advisers are still upbeat on the long-term prospects of the Indian markets in spite of the temporary setback caused by the spread of covid-19 and the impact on the economy.
“The best option for NRI investors to gain from the Indian markets rally is through mutual funds rather than directly investing in stocks without professional advice,” said Jojo James, chief executive, Fosbury Wealth Managers, and partner of Tamim Chartered Accountants, Dubai.
“Over the years, mutual funds have emerged as the most attractive avenue to earn long term market-linked returns.”
Investment advisers are basing their bet on the spectacular increase in assets under management (AUM) of Indian mutual funds.
$1.34 trillion magical figure
The AUM of the Indian MF Industry has grown five-fold fold in a span of 10 years, according to the Association of Mutual Funds in India (Amfi), the trade body and the registering agency for mutual fund distributors.
It rose to INR 33.67trn ($452bn, £326bn, €382bn) as of 30 June 2021 from INR 6.73trn in 30 June 2011.
This exponential growth is expected to continue to reach the magical figure of INR 100trn ($1.34 trillion; £968 bn; €1.13 trillion) over the next 10 years.
Mutual fund AUM reached:
- INR 10trn in May 2014
- INR 20trn in August 2017.
- INR 30trn in November 2020.
The mutual fund investor population in India has reached 23 million and the total number of accounts, or folios, rose to 102.6 million as of 30 June 2021.
The number of folios under equity, hybrid and solution oriented schemes, wherein the majority of the investment is from the retail segment, reached 85 million.
In tandem with the increase in the investor numbers, mutual fund distributors and investment advisers are on the rise.
Top asset management companies and India’s National Stock Exchange (NSE) are planning to enroll 50,000 new mutual fund distributors over the next three years.
Mutuals most beneficial
NRIs prefer to invest in fixed deposits and real estate in view of the safety of investments and capital protection, though the returns are minimal.
Bank fixed deposits offer an average return of less than 6% per annum. But informed investors started exploring investment options such as direct equities, mutual funds, liquid funds, government securities, bonds and gold through ETFs.
Advisers recommend that investing in mutual funds gives NRIs opportunities to get attractive returns by building a diversified portfolio of equity and debt in India. The investment process is online and can be done at any time and from anywhere.
“Mutual funds not only offer good returns but also various other key benefits like forex gains, easy online investment options and tax exemptions in India,” said Rajagopal Ramesh, chief executive, Veracity Consulting FZE, Dubai.
“NRIs need to open an NRE (non-resident external) account or NRO (non-resident ordinary) account with an Indian bank to invest in mutual funds in India.”
Common platform
Meanwhile, India’s capital markets regulator Securities and Exchange Board of India (Sebi) has directed registrar and transfer agents to develop a common platform for the purchase and sale of mutual fund units and to handle service requests in view of the delays faced by investors requesting redemptions and transactions.
At present, investors have to use the websites of mutual funds, or the services of distributors or commercial platforms.
A single platform will ease transactions for investors in an integrated system that allows access for all services across mutual funds in one place. The new platform will enable a user-friendly interface for investors for execution of mutual fund transactions such as purchase, redemption and switch.
The platform will provide services, including reports on mutual fund holdings in demat and standard statement of account, transactions, capital gains and losses, and details of unclaimed dividend and redemption.
The platform will be rolled out in a phased manner and will become fully operational by 31 December 2021, according to Sebi.
