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The Reserve Bank of India’s (RBI’s) move to cap remittances from $200,000 to $75,000 is likely to hit Indian appetite for securities such as shares of Facebook or Apple.
Indian investments in equity and debt is the second highest outgo for remittances, accounting for nearly a quarter of the same. Indians invested $236.9 million in equity and debt in foreign countries during the financial year ending in March 2013, RBI data shows.
This is larger than all other heads with the exception of ‘Gifts’ which accounted for $261.6 million
Interestingly, such investments are hit by a falling rupee in the reverse way that a foreign investor is affected. A depreciating currency chips away at any gains for a foreign investor. This adds to gains for an Indian investor who has assets abroad.
The flow of capital for such investment through this route has declined from $17.3 million in May 2012 to $13.3 million in May 2013, according to RBI data.
Wealth managers typically offer the high networth individuals or HNIs the option of investing abroad through the use of the remittance scheme. They do so through tie-ups with foreign brokerages. Interestingly, Sebi is said to be looking at the possibility of tightening the regulations on the same.
