Top banker tells wealthy Indians to load up on foreign stocks: Here’s why



The top private banker to India’s wealthiest is advising its clients to load up on overseas equities as a softening of rules makes it easier to access higher returns available in other parts of the world.


“The returns offered by some overseas are higher than what investors can get from Indian equities,” said Srikanth Subramanian, chief executive officer for private wealth at Kotak Investment Advisors Ltd. “This is not a short-term call, but a deeper, structural call, and as our conviction has increased, our model portfolio has seen a four-fold jump in allocation to overseas equities over the last 15-18 months.”



Record-low interest rates and stimulus packages around the world have pushed global equities to all-time highs during the pandemic. A local rule change by India’s market regulator earlier this year increased the amount each mutual-fund firm is able to buy in overseas equity to $1 billion, from $600 million, boosting appetite among Indians, Subramanian said.


The total amount invested in foreign shares surged more than 10-fold in the last 17 months to about Rs 25,000 crore ($3.4 billion) as Indians took to feeder funds to access the asset class, Subramanian said, citing industry data. That could increase further, according to Kotak Mahindra Bank Ltd.’s wealth unit, the biggest in India with more than 4 trillion rupees under management.


Some have also been using the so-called liberalized remittance scheme that allows an individual to send as much as $250,000 overseas, every year. The growing appetite for overseas has also attracted some of India’s biggest financial firms to offer international equity trading.


Here’s a look at Kotak’s model portfolio for an aggressive investor:


* About 80% to equities, of which 20% is allocated to international equities and 15% to passive funds or smart beta ETFs.


* 10% of the portfolio is for fixed income and another 10% to alternate investments.




——————————————————————————————————————————————————————-

Disclosure: Entities controlled by the Kotak family have a significant shareholding in Business Standard.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor





Source link

Share Market Today
Logo