Where do NRI get highest returns?

New Delhi, May 7 :

“With so many options, where should I invest my money in India?” asked Manibhai Patel from Kenya. The simple answer is where you get the highest returns.

However, sometimes an NRI ends up investing for reasons other than the highest returns. Residential property is one such option in which NRIs invest for reasons of family, security, prestige or emotional linkages.

An NRI wants a decent home for his parents and so he invests in residential property. Or, he wants to send a message to his relatives and friends that he has made it big abroad and so he buys a big home for his regular visits to the home country. In that case, other options do not matter though property prices have shot up in recent years. Residential properties in Bangalore, Pune, Chennai and Hyderabad have seen price rises of 100 to 200 per cent and Ahmedabad has also seen real estate prices doubling in select prime areas.

In Mumbai and Delhi, property prices have risen higher by 200 to 300 per cent. Since Delhi civic authorities launched a drive a few months ago to demolish illegal structures, commercial property prices there have gone through the roof. Another preferred investment option for NRIs is commodities. But gold prices have risen by 82 per cent since 2003 while silver prices have gone up by 200 per cent.

Now comes the clincher! The Indian stock market has outperformed gold, silver and real estate: the Sensitive Index or Sensex of the Bombay Stock Exchange — the key barometer of the market, rocketed from 3,338 points on April 29, 2003, to 12,042 points on April 29, 2006 — a whopping 261 per cent rise.

Before an NRI makes an investment decision, a few factors — risk, time period, liquidity, estimated returns and taxes — should be considered. Every investment option has its own risk element and the period over which it yields returns. The risk factor also applies to you as the investor in terms of how much risk you are willing to take on a particular stock! Are you going to put your money in blue chips or take a gamble on new players in the market? Of course, the investor’s need for liquidity and the expected returns are also important. Finally, how much tax is to be paid on the dividends or returns determines what you actually gain.

But will the Sensex keep on surging with its bull run? It is anybody’s guess but the economic fundamentals are in place in India. The Indian economy is at the crest of a boom and the Indian story is now a mainstream story among global investors. It is an international bestseller what with mergers and acquisitions valuations hitting dizzy heights. Among private equity investors’ portfolio, India is now increasingly commanding greater weightage. Despite rising valuations of the Indian market, about $3-4 billion is already lined up for fresh allocations this year compared with about $2.2 billion invested in 2005. The Sensex also continues to outperform itself, going from 11,000 to 12,000 points in a record time.

‘A New Record’ or ‘A New High’ is a regular headline in the news on TV and newspapers. This might be the time to invest in India as the wave can still go higher. Who knows, the market may reach 20,000 points before it has a correction! Take a good look at mutual funds — where your money is managed by professionals — and stocks with a potential for exceptional performance, as the real action is as a participant and not a spectator.

Manibhai, move your money where it will get the highest returns.