ETMarkets NRI Talk| The question is no longer 'Why India?' but 'At what valuation?': Bhaskar Hazra

For years, the question for global investors was whether India deserved a place in their portfolios. Today, that debate has evolved. As India's structural growth story remains intact despite short-term market volatility and modest returns, the focus has shifted from "Why India?" to "At what valuation?"

In this edition of ETMarkets NRI Talk, Bhaskar Hazra, Joint MD & CEO, Systematix Private Wealth, explains why long-term conviction in India remains strong even as investors become more selective.

He discusses how NRIs should approach India allocation, why currency risk matters as much as returns, the growing appeal of FCNR(B) deposits and fixed-income products, and why portfolios should be built around future financial liabilities rather than sentiment.


Hazra also shares his views on sector opportunities, the role of alternatives, and why financial assets are increasingly becoming a preferred avenue over direct real estate for long-term wealth creation. Edited Excerpts -

Q) Has sentiment changed towards India, especially with domestic markets failing to generate substantial returns for the past 2 years?
A) The last two years have tested investor patience. The Nifty 50 delivered 8.8% in CY2024 and was largely flat in CY2025. In CY2026, higher oil prices following Middle East tensions and sustained FPI selling have kept markets under pressure, with foreign investors pulling out nearly US$30 billion (over ₹2.2 lakh crore) from Indian equities this year.

That said, I would separate market sentiment from long-term conviction. Investors haven't turned negative on India-they have become more selective. Our conversations with NRIs have shifted from "Why India?" to "At what valuation?", "How should I stagger my investments?" and

"Should I hedge currency risk?"

Two- Three years of subdued returns after a strong rally isn't unusual. Markets go through phases of consolidation and geopolitical shocks have only amplified that process. Historically, every major Nifty correction over the past two decades has recovered within 2-3 years, while 15-year rolling equity returns have broadly remained at about 13-14% CAGR range.

The real divide today is not between investors who believe in India and those who don't. It's between investors with a 5-10 year horizon, who remain focused on India's long-term growth story, and those chasing 12-month returns, who are naturally more concerned. Our role is to help clients stay invested through cycles and focus on long-term wealth creation.

Q) Do you expect the RBI's FCNR(B) relaxation to materially increase foreign currency inflows over the next 12 months?
A) Absolutely. The inflows have already exceeded expectations.

Since the RBI announced the FCNR(B) relaxation on June 8, FCNR(B) deposits have crossed US$26 billion in just 45 days, already matching and likely surpassing the US$25–26 billion raised under the 2013 scheme. The RBI Governor has also confirmed that the broader package has attracted around US$32 billion in inflows so far.

This is significant because these inflows directly strengthen India's external position. With India's foreign exchange reserves currently at around US$676 billion, an additional US$32 billion represents nearly a 5% increase in the country's durable FX buffer and the window is still open.

That gives the RBI greater firepower to manage rupee volatility, meet external financing needs and reassure global investors during periods of geopolitical uncertainty and capital outflows.

The message is clear: when the RBI creates an attractive, risk-adjusted opportunity for NRIs, capital responds quickly. By allowing banks to offer more competitive FCNR(B) rates, the RBI has successfully unlocked idle foreign currency deposits.

Q) At 7.50% p.a., how attractive are USD FCNR(B) deposits versus similar fixed-income options in the US, Middle East, and other key NRI markets?
A) At 7.5% p.a. in USD, FCNR(B) deposits represent one of the more conservative, dollar-denominated fixed-income opportunities available to NRIs today.

The comparison is straightforward. US Treasuries and USD CDs currently yield around 4.5-4.7%, while leading banks across the UAE and GCC offer roughly 4-5% on USD deposits. FCNR(B) offers a 250–300-basis-point premium, while remaining fully repatriable and tax-free in India.

Equally important, the return is earned in US dollars, eliminating currency risk. That's a key distinction from rupee fixed-income or private credit products that may advertise 10-12%+ returns. For an NRI whose wealth and future liabilities are dollar-denominated, exchange-rate depreciation can significantly erode those higher nominal returns.

There's also a liquidity advantage. NRIs can borrow against their FCNR(B) deposits without breaking them, allowing the deposit to continue earning interest while accessing funds when needed.

For most NRIs, this is a rare combination of higher-than-global USD yields, zero currency risk, tax efficiency, full reparability and liquidity. That's precisely why the RBI's FCNR(B) window has seen such a strong response.

Read Also: ETMarkets NRI Talk | Alternatives can account for up to 20% of an NRI's India allocation: Shiv Gupta

Q) Which sectors in India look most attractive for NRI investors over the next 5-10 years?
A) For an NRI with a 5-10-year investment horizon, I'd focus on India's structural growth story rather than short-term market cycles.

The starting point is the macro picture. India is expected to grow at 6.4-6.8% annually, more than twice the global average, supported by favourable demographics, rising consumption and sustained government investment.

Within that, four sectors stand out.

• Infrastructure & Real Assets: Government capital expenditure continues to create long-term opportunities across roads, railways, airports and logistics. REITs and InvITs offer NRIs a simple, listed way to access these cash-generating assets.
• Manufacturing & Energy Transition: India's ₹1.25 lakh crore Semiconductor Mission and Production Linked Incentive (PLI) schemes are accelerating domestic manufacturing, while the country's target of 500 GW of non-fossil fuel capacity by 2030 is driving investment in renewables, battery storage and grid infrastructure.
• Financial Services (BFSI): India's credit penetration remains well below that of developed markets, while household financial savings continue to shift from physical assets to financial products. That creates a long runway for banks, insurers and asset managers.
• Healthcare & Digital Infrastructure: Rising incomes, expanding health insurance coverage, growing demand for quality healthcare and rapid adoption of AI and cloud computing are creating sustained opportunities in pharmaceuticals, hospitals and data centres.

Q) With global interest rates evolving, do Indian bonds offer attractive opportunities for NRIs?
A) Yes, but only if the investment matches the investor's currency needs.

For NRIs, the key decision isn't just the yield-it's the currency. While Indian government bonds offer attractive nominal yields, the rupee has historically depreciated by around 3-4% annually against the US dollar over the long term. That can significantly reduce returns for an investor who ultimately measures wealth in dollars.

That's why, for most NRIs, I suggest dollar-denominated fixed-income opportunities. FCNR(B) deposits currently offer around 7.5% p.a. in USD without currency risk, while GIFT City provides access to dollar-denominated deposits and bonds under a globally competitive, tax-efficient framework.

Rupee bonds make sense for a different investor-someone with future rupee liabilities, such as retirement spending, children's education, or family expenses in India. Through the RBI's Fully Accessible Route (FAR), NRIs can invest directly in long-dated Government Securities that offer a yield premium over comparable US Treasuries.

My view is that clients must match the currency of their investments to the currency of their future liabilities. If your goals are in dollars, stay in dollar assets. If your goals are in rupees, Indian bonds become a compelling long-term allocation.

Q) Can Indian fixed-income products become a reliable source of passive income for NRIs? If yes, how?
A) Selectively, but for NRIs, the currency of the return is as important as the yield.
Indian Government Securities and high-grade corporate bonds currently offer 7-8% yields, well above comparable developed market bonds. However, the rupee has historically depreciated by around 3-4% annually against the US dollar, which can materially erode returns for an investor whose base currency is USD.

That's why, for most NRIs, FCNR(B) deposits are the preferred fixed-income option. They currently offer 6-7%+ returns in USD, are tax-free in India, fully repatriable and eliminate currency risk. Compared with US Treasuries and USD deposits yielding around 4.5-5%, FCNR(B) offers a 200-300-basis-point yield premium without taking a rupee view.

Rupee bonds are one of the options for NRIs with future rupee liabilities-such as retirement or family expenses in India. Through the RBI's Fully Accessible Route (FAR), they can directly access long-dated Government Securities and benefit from India's higher interest-rate
environment.

For NRI investors, I suggest using FCNR(B) as the core for dollar income, rupee bonds for rupee liabilities, and private credit for those seeking higher returns and willing to accept higher credit and liquidity risk. The objective is not to maximise yield, but to maximise risk-adjusted, currency-adjusted returns.

Q) Does Indian real estate still deserve a place in an NRI portfolio, or have financial assets become more attractive?
A) Real estate hasn't lost its emotional appeal for NRIs-but it has become less compelling as an investment.

For many NRIs, buying a home in India is about family, legacy and staying connected to their roots. But as a financial asset, direct real estate is hard to justify. Rental yields are typically just 2-3%, transaction costs can exceed 7-10% and the asset is inherently illiquid.

Today, financial assets offer a stronger value proposition. Equities, fixed income and alternative investments provide better liquidity, transparency and diversification. Even for real estate exposure, listed REITs are a more efficient option, currently offering 5-7% distribution yields, along with potential capital appreciation-without the hassles of property management or high transaction costs.

An NRI should buy real estate for personal use or legacy, not as their primary investment. If your objective is long-term wealth creation, financial assets and REITs for real estate exposure-are typically the smarter choice.

Read Also: ETMarkets NRI Talk | RBI's FCNR(B) reforms could bring in over $20 billion of foreign inflows: Keyur Majmudar

Q) How should NRIs think about India in their global asset allocation today, and what percentage should ideally go to Indian assets?
A) India should earn its place in an NRI portfolio on fundamentals not sentiment.
India is projected to grow at 6.4-6.8% in FY27, more than double the global average, supported by favourable demographics, rising consumption and deepening capital markets.

The right allocation, however, depends on an investor's goals and future liabilities-not emotion. India represents only 4-5% of global equity market capitalisation, so any allocation above that is an active overweight and should reflect conviction in India's long-term growth.

In practice, NRIs in the US and Europe typically allocate 10-30% to India, while those in the Gulf, particularly those planning to return, often allocate 30-50%.

From a client perspective, future liabilities determine India allocation-not their passport. India should be a deliberate, long-term strategic allocation, reviewed regularly as their financial goals evolve.

Q) What role do Double Taxation Avoidance Agreements (DTAA) play in investment decisions?
A) DTAA is one of the simplest ways for NRIs to improve post-tax investment returns.
India has Double Taxation Avoidance Agreements (DTAAs) with over 90 countries, including the US, UK, UAE and Singapore.

These treaties ensure the same income isn't taxed twice and can significantly reduce the tax on Indian income such as interest, dividends and capital gains.

The impact can be substantial. For example, interest that may otherwise be taxed at 30% can reduce to 15% under the India-US DTAA and 12.5% under the India-UAE DTAA, provided the required documentation-such as a Tax Residency Certificate (TRC), Form 10F and PAN-is submitted.

The biggest opportunity I see is that many NRIs fail to claim these treaty benefits and end up paying higher taxes than necessary. Better tax structuring can improve returns without taking any additional investment risk.

Q) If an NRI has ₹5 crore to invest in India today, how would you allocate it across equities, debt, real estate, gold, REITs, and alternatives?
A) There is no one-size-fits-all number and any specific percentage split I offer without a detailed conversation with the client carries risk. The right allocation depends on three things: the client's risk profile, their time horizon in the market and their appetite for alternate investments.

A conservative NRI with a near-term liquidity need requires a very different portfolio from one with a 10-year horizon and no immediate draw on capital. Some clients are comfortable with the illiquidity and lock-ins of alternatives while others aren't, regardless of what their risk profile technically permits. And future currency needs - repatriation versus settling in India, change how much should sit in FCNR(B) deposits, G-Secs or rupee growth assets.

Broadly, equities and alternatives tend to drive long-term wealth creation, while fixed income products, provide stability. But turning that into hard numbers before understanding a client's specific circumstances is exactly the kind of generic advice that leads to poorly-suited portfolios.

The biggest mistake I see is a portfolio built on sentiment rather than one shaped by actual liabilities, tax efficiency and currency exposure through proper risk profiling.

Q) What role can alternatives such as PMS, AIFs, and private credit play in an NRI's portfolio?
A) Alternatives can meaningfully enhance an NRI portfolio-but they should remain a satellite allocation, not the core.

For most NRIs, AIFs offering access to private equity, venture capital and private credit through a pooled structure, without the operational complexity of managing individual securities.

Private credit can also enhance returns, with senior-secured strategies targeting 11-15% gross yields and higher-risk strategies targeting 15-20%. However, these come with higher minimum investments (typically ₹1 crore+), lower liquidity and greater manager selection risk.

(Disclaimer: The views expressed are personal and for informational purposes only. They do not constitute investment advice or a recommendation to buy or sell any securities.)