More than the outlook or behaviour of the economy in the home country, NRI investment propensity is above all influenced by perceived future risks.
The economic growth slowdown, job losses and uncertainty in the job market coupled with rising cost of living have made average NRIs cautious on committing to investments.
This tepid interest is seen at a time when assets under custody of NRIs have increased 147% since 2013-14. They accounted for INR13.18bn (£143.42m, $185.11m, €162.73m), rising to INR32.57bn as of November 2018, the latest month for which figures are available with the market regulator Securities and Exchange Board of India (Sebi), according to Indian financial daily Business Standard.
Shrinking asset size
“The coming months will see assets shrinking, considering the weakness in the economy and a gloomy outlook, both in the home as well as the host country. Apart from compulsory and regular payments such as insurance premiums, SIPs and loan repayments, NRIs tend to be non-committal on new investments even when the market outlook is rosy,” said Manoj Vallikudiyil, partner Manjul Associates, securities and investment consultants, Dubai.
“Any amount of persuasion or marketing by investment advisers will have little effect as scepticism is ruling the market. The investment advisory community here is facing such a grim situation,” he added.
Dwindling fee income
Dismissing reports that more brokers in India are preparing to explore the NRI market here, Binoo Nayyar, chief financial officer, TrendRiser Securities, Dubai, said the reality is just the opposite. “The fact is that many advisory firms are preparing to wind up operations here in a drying market. Fee income of many companies is dwindling. Thus, survival of many stand-alone advisers is in question. However, composite operators with sound financial muscle power have better chance to ride the adverse market,” he said.
Tracing the reasons for increased investments by NRIs, Binoo said a fall in the value of Indian rupee (the Indian currency lost almost 15% in value in 2018), a better perception of local fundamentals coupled with developed market issues have contributed to an increasing number of NRIs looking to invest in India.
The investment flow was mainly to stocks and property, though a major part was for loan servicing and settlements.
Anxiety and expectations
There are mixed views on the outlook for the Indian market in the run-up to the general elections in the world’s largest democracy.
In the next five months, India will be voting to constitute its 17th Lok Sabha, the lower house. The market is filled with anxiety and expectations of a stable government, thus leaving a trail of volatility in the markets.
But it is government policies and economic growth that is more important in the long run. Global cues will continue to impact the Indian stock market, before and after the elections.
There is another school of thought which predicts a much better outlook in view of the forecasted economic indicators for 2019.
As a political affairs observer said: “Regardless of which party comes to power, after initial reactions, the Indian market will continue to follow global trends and domestic realities.”