NRIs leave heirlooms at home with bulls

MUMBAI: More and more NRIs are putting the money they inherit in India into stocks instead of taking it out of the country. For a long time, most of the money received from selling property, ancestral land and family settlement found its way across the border. NRIs preferred to deploy the money in banks and markets of countries they are based in. No longer.

Today, the money is being invested in IPOs and buying shares from the secondary market. Such investments have surged from $362 million in 2000-01 to $6.3 billion in March 2007.

Besides the lure of windfall from a booming stock market, a liberal currency regime has contributed to the trend. Earlier, NRIs had restrictions in taking money from property deals out of the country. This was relaxed by RBI a little over two years ago.

The impact is visible. The figure on acquisition of shares by NRIs jumped from $930 million in 2004-05 to $2.2 billion in 2005-06, to $6.3 billion in 2006-07. (Excluding certain share-swap transactions worth $3.1 billion, the net figure for 2006-07 stands atover $3.1 billion). According to provisional figures released by RBI last week, in April 2007 alone, such acquisition of shares by NRIs was $868 million.

NRIs have been taking exposure in the country through the portfolio investment scheme, subscribing to overseas funds launched by fund houses in India and even through sub-accounts of FIIs.

Investments through these routes are not part of the above figures. As far as general investments by the diaspora is concerned, NRIs have been taking big bets on bank stocks. During September-December 2006, NRIs bought $3-billion bank shares.

Also, a portion of the money sent as remittances to the family members in India is getting stocks. According a recent RBI study, 3% of the funds sent home by the diaspora is invested in stocks and 54% is used for family maintenance. The balance is parked in other assets such as real estate, bank deposits and other investments.