The Hindu Business Line : `Investors can seriously benefit from global markets'

Chennai April 27 Earlier this week, the Liberalised Remittance Scheme came in for further liberalisation when the Annual Policy Statement of the Reserve Bank of India proposed doubling of the current limit of $50,000 to $1,00,000 per financial year for any permitted current or capital account transaction or a combination of both.

"The increase in investment allowed from $25,000 to $50,000 in December, and to $1,00,000 now, has truly given Indian investors an opportunity in real economic terms to be able to diversify his portfolio and to a degree mitigate risk," said Mr Rahul Kher, Head (International Operations), Religare Securities Ltd.

"Till date, the only opportunity available was different asset classes but all linked to Indian economy, unlike the global investor who holds a global portfolio and is able to benefit from cost and markets on a global basis, thereby reducing sector and market geography specific risk."

Now, an Indian investor can, for the first time, seriously benefit from global markets and utilise his knowledge to translate the same into returns for himself, Mr Kher said.

"The move towards enhancement of the remittance limit and easing of procedures is seen as a step towards full capital account convertibility and fuller integration of Indian investors/investments with the global capital markets.

"For an Indian investor, who till now could spread investment risk to Indian-centric investments only, this provides an avenue to invest in the biggest and the best companies from all across the world, and thereby diversify risks on a global scale and at the same time participate in the profits of global MNCs."

Besides, he said, in overseas investment one can cover credit, currency, and transaction risks."Asset allocation modules are criteria-specific. The quality of companies differs across markets, which price-earnings (PE) ratios may not capture. And in the event of a possibility of a correction and an interest rate hike at home, heading west could benefit the investor portfolio."

The overseas investment market is led by definitive research, he added.

"The range of investment opportunities available abroad is phenomenal, providing one with more width and depth. For instance, in India, currently the duration of a derivatives contract is three months; liquidity is mostly restricted to one-month contracts. Overseas, an investor can take longer derivative contracts."

So, what should investors do to gain from the development? "As a first move towards gaining international exposure and diversification, investors should invest in mature and strongly efficient markets like the US."

But why the US? Because "US markets per se are more definitive, research-led and retail investor-friendly leading to less volatility and providing the much-needed stability to an investment portfolio."

He added: "US markets are highly regulated, with the SEC being the most stringent and global standard setting regulator in the world, lending extra safety to investor funds. An investor can also establish a truly global portfolio, since most reputed global companies from different regions of the world are represented in the US bourses."

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