Brokers lure NRIs to stock markets

Bourses appear lucrative as interest rates of FCNR deposits drop.

Falling interest rates on foreign currency deposits of non-resident Indians (NRIs) have come as a blessing in disguise for local brokerages.

Expanding their reach in the overseas markets, broking houses are luring the NRI community to invest in the booming domestic equity markets.

While Geojit Financial Services and Kotak Securities are already managing large NRI portfolios in West Asian countries, Sharekhan, yet another local brokerage outfit, recently launched a broking platform called India First in Bangkok for NRI clients.

Broking industry officials say other brokerage houses are also looking to expand aggressively in overseas markets to tap NRIs.

With the rupee rising to its strongest since February 1998, banks have reduced the rates on FCNR deposits to about 3.8 per cent for two-year, dollar-denominated deposits.

For NRI rupee-denominated deposits, rates were down by at least 15 basis points or about 4.45 per cent for two-year deposits as against 8.85 per cent for domestic depositors.

Kaushal Sampat, chief operating officer, Dun & Bradstreet, said NRI investments would soar in the coming years as a consequence of the depreciating dollar and credit woes in the US and European markets.

"The performance of Indian stock markets and the potential infrastructure opportunity envisaged in the next five-year plan is likely to attract high attention from NRI investors," he said.

The benchmark stock indices have risen 45 per cent-plus annually over the last three years and the returns are expected to continue as a result of the India growth story.

The Reserve Bank of India (RBI) data show that annual inflow of NRI deposits in the country for 2006-07 was $3,895 million in 2006-07, an increase from $2,789 million in 2005-06. The US, UK, UAE and Saudi Arabia are the top countries from which a majority of the NRI inflows are coming into India.

The total outstanding NRI deposits in the country now are $39.62 billion. Brokerages are trying to lure at least a portion of this amount to the equity markets.

"There is a positive climate for investments in equity markets for NRIs and besides we are also enabling them with the means," said Sandeep Nanda, the executive vice-president (research) at Sharekhan.

Apart from investment in property, NRIs also invest in company deposit schemes. "Equity offers much higher returns and our attempt is to sell the successful story of the Indian stock markets," he said.

MARKETS BECKON

With the rupee rising to its strongest since February 1998, banks have reduced the rates on FCNR deposits

There is a positive climate for investments in equity markets for NRIs

Geojit Financial Services and KotaK Securities are already managing large NRI portfolios in West Asian countries

Sharekhan recently launched a broking platform called India First in Bangkok for NRI clients