The capital markets have not performed well in the past four years. And in the near term (six months), they will be events driven (policy reforms), say experts.
According to data compiled by BS Research Bureau, the Bombay Stock Exchange's Sensitive Index or Sensex and the National Stock Exchange's Nifty have lost 24 per cent each between December 31, 2007, and December 31, 2011.
In 2012, the returns from these indices have been positive. The Sensex returned close to 10 per cent and the Nifty over 11 per cent (as on June 27).
Experts say, the wait to earn good returns has been a long one for investors. As a result, many have turned negative on India and started considering options internationally. Some upward trend has been witnessed in corporate earnings in US-based companies.
Says Sunil Mishra, CEO of Karvy Private Wealth, “A few high net worth individuals (HNI) and ultra high net worth individuals (UHNIs) have started investing in stocks, property and managed commodity futures in the US.”
You can invest abroad under the Reserve Bank of India (RBI)'s Liberalised Remittance Scheme (LRS), which allows an individual to invest up to $2 lakh or Rs 1.10 crore ($1 = Rs 55) a year.
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RBI's data as on June 11 on outward remittances under the LRS for resident individuals show it increased by $12,000 million to $46,847 million provisionally in 2011-12.
Investing in stocks abroad
You need to approach a licensed foreign broker and have a bank account in the country for transactions, as you would have to transfer funds from your domestic account to the foreign one, from where the money would be transferred to your online trading account. To fulfill the know-your-customer (KYC) needs, you require a PAN (permanent account number) card, address proof and financial dossiers to establish your net income. You may also have to provide $5,000 (Rs 2.75 lakh) as a minimum deposit while opening the trading account. The account opening charges may be between zero and $20 (Rs 1,100). Plus, there will be quarterly account maintenance and brokerage fees. This entire account(s) opening process can take up to a month.
But, no Indian broker tracks US-based companies and you might not get the kind of advice you want. The Dow Jones index has returned over three per cent and the Nasdaq Composite has give nearly 10.50 per cent.
Managed commodity futures
Says Amar Ranu, senior manager, third party products research, at Motilal Oswal Wealth Management, “It is a quantitative product and takes calls based on technical analysis. These target only absolute returns. In a volatile market conditions, it can earn better returns but is advised in combination with traditional products.”
And it is typically a small part of ones portfolio (less than five per cent) as it is very risky. The process of investing is similar to stocks.
Properties abroad
Property prices in the US have not recovered since 2008 crisis. Hence, the range for potential upside in prices is strong. Also, for a budget of $100,000 (Rs 55 lakh) while you might not have many options in India, you might find quite a few in the US. Typically, investors are advised a four-five year horizon.
But, Ashutosh Limaye, head, research, of Jones Lang LaSalle says, “While the property market may look attractive because of price points, capital appreciation there is not much as it is a mature economy. In comparison, rental yields there can be good (three-four per cent) against the interest rates of 1-1.5 per cent, as the population there is very mobile. India has a similar rental yield but the rates are very high here.”
Feeder PE funds
These work like any other feeder fund just that they invest in international private equity funds. But, here, apart from a high-ticket size you also need to have a long term horizon of five years or more. Returns from these funds are typically in the range of 20-23 per cent.
But you need to be careful about the currency woes, especially at a time when the rupee has depreciated nearly 30 per cent since August 2011. Also, these avenues are not for low-ticket (less than Rs 50 lakh) and retail investors.