ETMarkets NRI Talk | 50-60% in equities? R Sivakumar Axis MF CIO’s Rs 1 crore NRI portfolio playbook

For NRIs looking to invest in India with a 5-7-year horizon, deciding how much to allocate to equities, fixed income, gold and alternatives can be challenging, particularly when currency movements, taxation and existing global exposure also need to be factored in.

R Sivakumar, CIO, Axis Mutual Fund, believes the starting point should be a diversified asset-allocation framework rather than market views alone.

For an NRI with ₹1 crore to invest and a moderate-to-growth-oriented risk profile, Sivakumar suggests an illustrative allocation of 50-60% to equities, 20-25% to fixed income, around 10% to gold, 5-10% to REITs/InvITs and up to 10% to alternatives such as AIFs or private credit.


However, he stresses that the final allocation should depend on the investor’s existing global portfolio, India exposure, tax status, liquidity needs and long-term wealth goals. Edited Excerpts –

Q) India continues to attract significant interest from NRIs. What are the biggest hurdles NRIs still face when trying to invest in Indian equities and mutual funds, despite the process becoming increasingly digital?

A) India remains a compelling long-term opportunity for NRIs, but the investment journey can still feel fragmented despite increasing digitization. Key hurdles include documentation and compliance requirements such as KYC, FATCA/CRS declarations, PAN, overseas address verification and bank account mapping.

FATCA/CRS declarations are tax-residency disclosures required under international information-sharing rules to help prevent tax evasion and ensure cross-border transparency.

Account structuring is another area of confusion, particularly around choosing between NRE and NRO accounts and understanding the implications for repatriation. NRIs in certain jurisdictions, especially the US and Canada, may also face additional product and platform restrictions due to regulatory requirements.

Beyond operational issues, the bigger challenge today is portfolio construction for NRIs in terms of how to invest in India and how much of their global portfolio should be allocated to India.

Often, they already have indirect exposure through real estate, family assets or rupee deposits, yet are under-allocated to financial assets such as equities and mutual funds. Taxation adds another layer of complexity, with investors needing to navigate TDS provisions, cross-border tax reporting and the interaction between Indian and overseas tax regimes.

Q) With the rupee hitting 96 per USD, has it impacted NRI investments into India? What is the general mood?

A) A weaker rupee tends to create a mixed but generally constructive sentiment among NRIs. On one hand, every dollar remitted translates into more rupees, improving the purchasing power of overseas investors and making Indian assets appear relatively more attractive from an entry valuation perspective.

On the other hand, NRIs are equally conscious that investment outcomes ultimately need to be assessed in their home currency, as currency depreciation can dilute returns over time.

As a result, the current mood is not bearish, but more discerning. NRIs continue to be optimistic about India's long-term growth prospects and remain interested in participating in the country's structural growth story.

However, they are placing greater emphasis on factors such as currency risk, diversification across asset classes, repatriation considerations, and post-tax returns.

In our view, currency movements may influence the timing of investments, but they are unlikely to be the primary driver of allocation decisions. The key consideration remains whether India continues to play a meaningful role in an investor's long-term wealth creation strategy.

Q) For an NRI looking to invest in Indian stocks, how should one decide between an NRE and NRO account? What are the key differences from an investment and repatriation perspective?

A) The starting point is the source of funds. If the money is earned overseas and remitted into India, an NRE account is generally the cleaner route because both principal and investment proceeds are freely repatriable.

If the money originates in India, such as rent, dividends, pension, sale proceeds or existing savings, it typically flows through an NRO account.

From a repatriation perspective, NRE balances are freely repatriable, while NRO balances are generally subject to the prescribed annual repatriation limit and documentation requirements, including tax compliance.

For direct equity investing, NRIs also need to ensure the correct investment account structure, including Portfolio Investment Scheme (PIS) or non-PIS route as applicable.

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Q) Are NRIs under-allocated to Indian equities compared with their overall exposure to India? Which asset classes should they consider beyond direct stocks and mutual funds?

A) In many cases, yes. NRIs often have a strong emotional, family and real estate connection with India, but their financial portfolios may not reflect India’s structural growth opportunity adequately. Many are overexposed to physical real estate and bank deposits, while being under-allocated to diversified financial assets.

Beyond direct stocks and mutual funds, NRIs can consider a broader allocation across high-quality fixed income, target maturity or debt-oriented solutions, gold, REITs, InvITs, PMS and AIFs, depending on their risk profile, ticket size, liquidity needs and tax situation. The key is to avoid concentration and build a portfolio that balances growth, income, liquidity and currency risk.

Q) Tax is often one of the biggest concerns for NRIs. How should they think about the tax treatment of equity, mutual funds, bonds, FDs and alternative investments in India?

A) NRIs should think of taxation at three levels: product taxation, TDS, and taxation in the country of residence. In India, listed equity and equity-oriented mutual funds are generally taxed based on holding period, with short-term gains taxed at 20% and long-term gains taxed at 12.5%, with the specified annual exemption for long-term capital gains on certain financial assets.

Debt mutual funds, bonds, fixed deposits and alternative investments are subject to separate tax regimes depending on the nature of the instrument and type of income. Interest income is generally taxable at applicable tax rates and may be subject to withholding, while capital gains taxation varies across products.

The important difference for NRIs is that TDS is often deducted at source, especially on redemptions or income distributions, and they may need to file an Indian tax return to claim a refund or apply treaty benefits where eligible.

They should also consider tax rules in their country of residence, particularly for investors in jurisdictions such as the US, UK, UAE, Singapore or Canada.

Q) Are you seeing greater interest from NRIs in newer products such as AIFs, PMS, private credit, REITs and InvITs? Which of these could see the biggest growth in NRI portfolios?

A) Yes, interest is clearly rising, especially among HNI and UHNI NRIs who are looking beyond traditional mutual funds and real estate. PMS and AIFs are gaining traction because they offer more differentiated strategies, including concentrated equity, long-short, private credit and thematic allocations.

REITs and InvITs are also relevant because they offer a listed, regulated route to income-generating real assets without the operational burden of owning property directly.

Over the next few years, we believe private credit, REITs/InvITs and professionally managed equity strategies could see meaningful growth in NRI portfolios, provided investors understand liquidity, risk, taxation and suitability. The growth will be strongest where products are transparent, well regulated and easy to access.

Q) If an NRI has ₹1 crore of surplus money to invest in India with a 5–7-year horizon, how would you divide it across equities, fixed income, gold, real estate and alternatives?

A) Before thinking about specific products or asset classes, NRIs should start with a clear asset allocation framework aligned to their financial goals, liquidity needs, risk appetite, tax considerations and country of residence.

The objective should be to build a diversified portfolio rather than make allocation decisions based on market views alone.

For an investor with a 5–7-year horizon and a moderate-to-growth-oriented risk profile, a broad allocation could be: 50–60% in equities through diversified mutual funds, PMS strategies, or a blend of large-cap, flexi-cap and mid-cap exposures; 20–25% in fixed income through high-quality debt funds, bonds or deposits to provide stability and income; around 10% in gold as a portfolio diversifier and hedge against currency and market volatility; 5–10% in REITs, InvITs or other real estate linked financial instruments, which can offer exposure to real assets without the challenges of owning physical property; and up to 10% in alternatives such as AIFs or private credit strategies, provided the investor is comfortable with their higher risk, lower liquidity and longer investment horizon. That said, this should be viewed only as an illustrative framework.

The optimal allocation will ultimately depend on the investor's existing global portfolio, India exposure, tax status, cash flow requirements and long-term wealth objectives.

Q) Could we see more India-focused global funds or India-domiciled products in GIFT City designed specifically for overseas Indians who want Indian exposure without navigating multiple investment accounts?

A) Yes, this is an important trend to watch. GIFT City has the potential to become a preferred investment gateway for NRIs looking to access India through a globally oriented platform.

The key benefits include foreign currency based investments, simpler repatriation, and access to a wide range of India-focused and global investment products.

For NRIs, this could mean easier access to opportunities across banking, mutual funds, capital markets and alternative investments within a single international financial ecosystem.

As the platform evolves, we may also see more USD-denominated India funds, ETFs, fund-of-funds and alternative investment strategies designed specifically for the overseas Indian community. Overall, GIFT City can help make investing in India more convenient and globally integrated for NRIs.

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Q) What new financial product is currently missing from the Indian market that could significantly improve the investment experience for NRIs?

A) Rather than another standalone investment product, what many NRIs need is a single, integrated India investment solution. The investment challenge is often less about product availability and more about ease of access and administration.

An ideal solution would be a globally accessible, professionally managed India multi-asset portfolio, preferably available through GIFT City and denominated in foreign currency.

Such a platform could combine equities, fixed income, gold and other assets within one structure, while also offering seamless onboarding, consolidated reporting, transparent taxation and simplified repatriation.

The real opportunity is not to add more products, but to remove friction from the investment journey. Making India easier to access, manage and invest in could unlock significantly higher NRI participation over the long term.

Source: Axis MF Internal Research

Note: The sectors mentioned above are used to explain the concept and is for illustration purpose only and should not be used for development or implementation of any investment strategy. It should not be construed as investment advice to any party. Past performance may or may not be sustained in future.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)