This article was first published on livemint.
Why should I invest in Indian stock markets when I can also invest in USA stock markets?
Indian stock market capitalization is expected to grow at a 10% compounded annual growth rate (CAGR) in the next 10 years. Booming stock market capitalization is expected to deliver a high return on equity investments. Investing in India equity markets also helps non-resident Indians (NRIs) to diversify their investment portfolio while benefiting from a stable rupee currency. In the last three years, the US dollar has risen only by 1.4% annualized against the Indian rupee.
Performance of the Indian equity market has been superior to that of the US, the UK, and Hong Kong stock markets. In the last five years, India BSE 500 index has delivered 5% per annum superior returns to US S&P 500 index. At the same time, good Indian mutual funds have outperformed the broad market indices by as much as 10%. Hence there is a strong case of investing in Indian equity markets through mutual funds.
I have ₹5 lakh in my old salary account in India. Can I use that for investing in mutual funds (MFs) as an NRI?
If you have spent more than 182 days living outside India, then your status changes to NRI. You need to convert your salary/savings account to non-resident ordinary or NRO account before investing. This is just a change in status and the account will continue to operate as is. Once converted to NRO, you can use that account to invest in MFs. You will need to complete a fresh MF KYC (know your customer) as an NRI.
You can also open an NRE savings account if you are planning to invest your foreign income in Indian MFs. It is not allowed to use your existing resident savings account once your status changes to NRI without converting it to NRO.
What is the process to complete mutual fund KYC for NRIs?
There are two important requirements for NRIs to start investing in mutual funds in India: PAN card and rupee designated NRO or NRE (non-resident rupee) bank account.
The following documents are required to complete the one-time KYC process: PAN card copy; passport copy (front and back page); foreign address proof/Indian address proof (if your passport has foreign address proof, then provide an Indian address proof and vice-versa); bank proof (cancelled cheque or bank statement from NRE or NRO account); person of Indian origin (PIO) or Overseas Citizen of India (OCI) Certificate—only required for investors who are not Indian citizens.
Note that even if you had done a mutual fund KYC earlier as a resident Indian, you will need to do the KYC again as an NRI.
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