The recent rally in stock markets has had its spillover effect on mutual funds. Domestic investors have shown renewed interest in mutual fund schemes and predictably funds have recorded large inflows in the recent months. However there is another investor class who should seriously consider mutual funds as an investment option – the Non Resident Indians (NRIs)
NRE (Non-Resident External Rupee Account) deposits used to feature as favoured investment options for NRIs on account of the attractive interest rates offered by domestic banks. However, the ceiling recently imposed on interest payments from these deposits has proven to be a dampener. The Reserve Bank of India has capped the interest on repatriable NRE deposits of one to three year tenures at 1.0% above LIBOR (London Inter Bank Offered Rate). Also the fact that returns are now linked to LIBOR implies that the investor will now have to deal with floating rates. Clearly NRE deposits are no longer attractive investment avenues for most investors.
NRE Fixed Deposits
| Maturity Period |
Interest Rates (p.a.) |
| 12 months to 18 months |
2.45% |
| 18 months to 24 months |
2.85% |
| 24 months to 36 months |
3.25% |
| 36 months to 120 months |
4.00% |
(Indicative rates presently offered by leading Indian banks)
On the other hand leading mutual funds have offered far superior returns vis-à-vis NRE deposits in the recent past. Top income funds have offered returns in the range of 17.0% to 14.0% in the last one year period (this of course is an aberration which is unlikely to be repeated in the near future). However the bottom-line is that the investor can be handsomely rewarded for the additional risk he bears.
For investors with higher risk appetite, there are balanced and equity funds. Here too, investors have been handsomely rewarded.
Equity & Balanced funds: Top performers
| Diversified Equity Funds |
NAV (Rs) |
5-Yr |
| HDFC EQUITY G |
36.92 |
36.3% |
| FRANKLIN PRIMA FUND G |
50.15 |
35.8% |
| RELIANCE VISION G |
46.03 |
34.6% |
| RELIANCE GR G |
51.57 |
30.8% |
| FRANKLIN I BLUECHIP G |
34.95 |
30.3% |
|
| Balanced Funds |
NAV (Rs) |
5-Yr |
| HDFC PRUDENCE G |
36.10 |
28.0% |
| ALLIANCE 1995 G |
64.27 |
25.6% |
| UNIT SCHEME 95 G |
24.07 |
22.7% |
| JM BALANCED G |
13.04 |
20.5% |
| TATA BALANCED |
17.40 |
17.8% |
|
(NAVs as on September 25, 2003, Growth over 1-year is compounded annualised)
Thanks to the internet investing in mutual funds is simply a click away. Leading mutual funds and distributors (which include personalfn.com) offer investors the facility to download forms thereby making investing extremely user-friendly. Mutual fund houses like Franklin Templeton, HDFC etc. provide not only information related to various schemes (NAVs, scheme objective, and fund portfolio) but also application forms in downloadable formats.
But there is another aspect to investing which a smart investor should not overlook i.e. methodically filtering through various schemes and deciding on the one which suits him/her the best. All the information and statistics would be worthless if the investor fails to identify the right scheme. This is where experienced and credible financial advisors play a crucial role. These individuals possess in-depth knowledge and expertise in creating investment solutions. The right investment consultant plays a vital role in bridging the gap between your current position and your financial goal.
What you should look for in an advisor?
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Online presence – so that you can research, track and keep your self updated without even having to pick up a phone!
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Research – to ensure that every decision is backed by solid, fundamental analysis.
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Online tracking tools – so that you are always up-to-date on the performance of your portfolio.
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Evaluation tools – reports and views to ensure that at any time you are invested in the best in class instruments.
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Efficient service – to ensure that your investment decisions are acted upon pronto on a timely basis
It’s only fair that investments should fetch investors desired returns. For NRIs mutual funds are likely to be the new mantra.
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