NRI equity assets up threefold

The diaspora has taken a liking to equities under Narendra Modi era. Stock assets owned by non-resident Indians (NRIs) has jumped three-fold to ~2,675 crore between December 2013 and December 2016, data provided by Securities and Exchange Board of India (Sebi) showed.

Although Modi government came to power in May 2014, the stock markets had started their upmove since December 2013 in anticipation of a change of guard. The value of NRI holding in December 2013 stood at ~900 crore. The increase in NRI assets is far higher than the 30 per cent gains on the benchmark Sensex during this period.

Market players say they have seen an increase in new NRI accounts as well as improved flows in existing accounts since the government has taken charge. They attribute the optimism to improvement in macroeconomic fundamentals of the country, confidence in the new government, and buoyancy in primary markets.

NRI investments have persisted, even though equity market returns since May 2014 have been singledigit. The Sensex had rallied 40 per cent between December 2013 and April 2014; however, a mix of global and domestic headwinds has let some steam out of the rally. The Sensex lost more than five per cent during 2015, and ended 2016 with near-zero returns.

"Unlike foreign institutional investors (FIIs), NRIs don't follow market trend. Their investment pattern is largely based on confidence they have in the market and the government. This trend is expected to continue in the days to come as government unveils various reforms such as goods and services tax," said Rajesh Cheruvu, head of equities, Sanctum Wealth Management.

Buoyancy in primary markets was another important reason for increased participation of NRIs in Indian markets as some newcomers have yielded stellar returns, experts said. In the past two years, primary markets have witnessed initial public offerings of shares worth more than ~40,000 crore.

Experts say India's high economic growth amid slowing global growth, too, might have attracted NRI investments. "India is currently growing at a brisk pace. Interest rates have been on the lower end globally in the past few years. Hence, Indian equities looked attractive to invest in," said Rajeev Thakkar, investment chief, Parag Parikh Financial Advisory Services. However, Thakkar added the scenario could change as increasing interest rates in the US and flattish performance of Indian equities could narrow the attractiveness of the market.

Market participants say there is even bigger potential in the NRI segment which brokers are unable to tap due to operational difficulties arising from current regulatory framework.

NRIs have persisted, despite single-digit market returns since May 2014