With a few exceptions, NRI investment advisers in the UAE expect to cater to fewer clients in the wake of uncertainty around the economic recovery back home, as the second wave of covid-19 wreaks havoc.
India has seen a terrifying increase in coronavirus cases in the past few weeks. New Delhi and many states have been placed in lockdown.
The US Centres for Disease Control and Prevention has advised against all travel to India, and the UK recently added the country to its ‘red list’.
India’s tally of more than 15.6 million covid cases is the second-highest in the world, behind the US and ahead of Brazil.
The total number of deaths jumped to 182,553 after a huge one-day spike on Tuesday.
The economic impact will be severe, capable of devastating the markets and growth for many quarters to come.
The case is no different in the host countries. Businesses are hit, jobs are either lost or income reduced, leaving less disposable income for investments. Investment decisions are put on hold.
“Traditional advisory firms find it difficult to get new clients and retain the existing ones. The economic uncertainty has forced them to adapt and find new ways to engage with clients. But the choices are few,” said Rajagopalan Ramesh, chief executive of Veracity Consulting FZE.
There are four categories of NRI investors:
- Super-rich businessmen,
- Higher income professionals,
- Middle income executives
- Low income workers.
Of these, the last category rarely seeks professional advice for their investment decision. The rich are catered to by big ticket wealth managers, leaving the second and third categories to be serviced by professional advisers.
However, even these categories are hitting pause on their investment decisions in view of the looming uncertainty.
Don’t forget insurance
But it’s not just investment that NRIs need to think about, as advisers have been reminding non-resident Indians about the need for adequate insurance protection.
Sajith Marakar, managing director of Abu Dhabi based surveyors Consolidated Services Bureau, advises that insurance protection should not be ignored in the face of loss of job or income. Adequate insurance cover is the need of the day. The first priority should be a life cover, then medical insurance, followed by many other protections such as property and casualities.
Health insurance comes with the double benefit of medical coverage for the policyholder and their family, as well as tax benefit.
NRIs who have health insurance policies in India are eligible for tax exemption on their income in India.
“Along with providing the much-needed medical coverage for the family, an NRI will also be eligible for a tax break on taxable income earned in India,” he said.
Not all is lost
In spite of these uncertainties, there is a good number of NRIs looking to cash in on the bearishness.
Ajay Mehta, director, Vision Ventures, offers some suggestions to create a suitable investment portfolio.
The investment portfolio should be a stable one with a certain amount of predictability about the risk, returns and other outcomes. To achieve this, one should look at what is called traditional asset classes or primary asset classes. These are fixed income or debt instruments and equities.
When you allocate funds, the basic asset classes take up a major share of the allocation. While equities may give you growth through higher returns over the long run, fixed income provides you with relatively lower but stable returns.
Fixed income provides stability to the portfolio. Beyond the traditional assets are what we call alternate assets. These include asset classes like gold, real estate etc.
Gold provides some amount of hedge against inflation and it is worthwhile keeping in the portfolio but to an extent of 5% of the portfolio because it will not give you any regular cash flows or income but over longer time periods you will get some amount of appreciation.
