India has shown tremendous potential for growth through its rapidly growing economy, making it an attractive country for investors. There are several different instruments in which you can invest and accrue impressive returns. If you are an NRI and wish to make investments in instruments in India, your risk appetite, investment capacity, and ability to patiently wait for the maturity period to end will be the factors that determine how successful your investments will be. Here are some great short-term investment options for NRIs who wish to invest in India:
Among the most basic investment options and one of the best options in the country for non-residents of India includes the Non-Residential External Rupee Account (NRE Account). It is basically a fixed deposit account which offers interest rates up to 8.5%. Foreign Currency Non-Resident (FCNR) bank deposits work in much the same way as NRE accounts, where the interest you earn will depend on the currency that you deposit. Moreover, interest earned on both NRE accounts as well as FCNR are completely exempt from tax in India. Another decent investment option in India for NRIs is a Non-Resident Ordinary Rupee Account (NRO Account), which offers interest rates ranging between 4% and 7.5% depending upon the deposit’s maturity period.
Ultra-Short-Term Funds and Liquid Funds
Ultra-short-term funds and liquid funds are great short-term investment options for NRIs in India. Liquid funds usually come with a 2-week holding period and on average, the maturity of the debt instrument takes place within 91 days. There are no exit loads on liquid funds and the risk they carry is also relatively low. In comparison, ultra-short-term debt funds have a 3-month holding period, on average, and the maturity period for these instruments ranges from one week to 18 months. The returns offered by ultra-short-term debt funds are relatively higher in comparison with liquid fund. However, ultra-short-term funds are usually subject to an exit load for a brief period of time from the date of investment.
Mutual funds are subject to market risks, but they also have the potential to generate handsome returns. Both equity and debt funds are worth considering for a profitable investment. The best way to invest in equity mutual funds is through Systematic Investment Plans (SIPs). Over a period of time, these investment instruments have the ability to deliver returns ranging from 15% to 18%. The funds are managed professionally by a fund manager employed by the asset management company. Diversified funds and large-cap funds are the best options for investment in mutual funds. However, the risk involved with investment in equity funds can be quite high. Debt funds, on the other hand, come with relatively low risk and provide liquidity to investors and also ensure that your capital is safe and secure. The returns they offer, however, are comparatively lower than the returns generated by equity funds. Planning of investing in mutual funds? To know more, click here!
Certificate of Deposits
Certificate of Deposits are basically non-negotiable money market securities that are issued in the dematerialised form. The maturity period of these instruments ranges from 7 days to one year, and they have high liquidity. Certificate of Deposits can also be availed on a repatriable basis. The interest rates offered by these instruments are higher than the rates offered by bank FDs, making them attractive investment options in India for NRIs.
Short-Term Debt Funds
Investment in short-term debt funds opens up a portfolio consisting of government bonds and deposits, treasury bills, etc. These investments are virtually free of risk and come with a 3-year maturity period. Although the returns generated by short-term debt funds are not too high in comparison with the investment options covered above, they are safe investment instruments that provide moderate returns but more importantly, ensure the safety of your capital.
Investing in short-term instruments in India can work out well for non-residents. There are so many different funds and options to choose from, making it important to assess as many options as possible to ensure that you find the best one. The duration of your investment along with your risk appetite will determine your returns. Also, investing through a currency that is stronger than the rupee will only leave you with more capital to make investments in India.