In 2022, the Indian Rupee has lost 3.5 percent versus the US dollar. In fact, the Indian currency lost more than 1.2 percent last month alone. Five years ago, the Rupee was worth Rs. 64.60 per dollar year-to-date in 2017.
The continuous worldwide geopolitical tensions, the rise in oil costs, a shortage of food imports and the concomitant rise in inflation are the causes of this rapid drop. While investing in assets or spending in Indian currency in a foreign country may become more expensive, there are chances for an NRI to profit. If you are an NRI investing in India, the decrease in the value of the Indian currency means that every dollar you repatriate home is worth considerably more.
NRI remittances from countries like the United States, the United Arab Emirates, the United Kingdom, and a few Asian countries have historically increased when the Rupee’s value fell. Investment in India has grown much more profitable as the value of the US dollar has increased. Even though international remittances are on the rise, NRIs should pay particular attention to the channels through which they execute their investments to optimize monetary gains.
Inflationary pressures have prompted central banks throughout the world to limit market liquidity, resulting in an interest rate hike. With a 10 to 20 basis point rise in interest rates applicable to NRE and NRO accounts for particular investment tenures, domestic fixed deposit investments have become more profitable. New bonds issued at higher interest rates have a similar impact, making debt mutual funds more appealing to NRIs.
Stock Market Play:
NRIs who participate in the stock market usually borrow money from abroad and invest in India, where interest rates are cheaper and the US currency is on an ascendancy. During the shutdown, the allure of the Indian stock market enticed many NRIs in the Gulf to borrow money from UAE-based financial institutions and invest it in the Indian stock market. Low loan rates overseas and better returns on investments in Indian stock markets may have seemed like a good idea until the outbreak of the Ukraine-Russian conflict and its price rises, supply interruptions, and inflationary consequences. It may not be lucrative, given rising loan rates and recent volatility in the Indian stock market.
Every investor should be aware that equity investment is susceptible to market volatility. Borrowing money to invest in hazardous assets is a financial mistake that should be avoided. Risk appetite, time horizon, and market cycle should all be considered while making investments here.
Real estate is a wonderful investment while the rupee is depreciating. NRIs have flocked to real estate, particularly those in the Gulf who hope to return to their home country after retirement. NRIs with current house loans in India may now pay down bigger sums on loans at the same EMI value as before, thanks to the rupee’s devaluation.
Accrual of Income:
The two primary things that destroy your savings are taxes and inflation. While inflation is uncontrollable, the appropriate portfolio mix can help mitigate risk. Furthermore, effective investment management can result in decreased tax payments and increased savings.