“The BEST
Investment opportunity is provided only in times of CRISIS”.
Indian importers are
aghast, shocked and caught unawares at the sudden fall in rupee vis-a-vis the
US dollar…an Indian traveller, the Indian Govt. and the Indian Importer are in
pain as they have to pay full 15 to16% more rupees today to buy 1 US dollar
compared to a year back…
Have
a look at the table below…
|
Time Period
|
1 year ago
|
6 months ago
|
3 months ago
|
Current
exchange rate
|
|
Date
|
17-JAN-11
|
16-JUNE-11
|
16-SEP-11
|
16-DEC-11
|
|
1 USD = INR
|
45.48
|
44.84
|
47.40
|
52.63
|
|
Rupee depreciation
|
16%
|
17%
|
11%
|
-
|
While
it takes us Indians approx. Rs. 52.63 today (16-DEC-11)
to buy one
US dollar, we could buy 1 USD by paying a mere Rs. 45.48 a year back. The rupee
has depreciated against the US Dollar by a good 16% compared to a year ago (or
should I say that the USD has appreciated by a cool 16%). What’s more, the
sharp fall in the rupee against the dollar has been sudden, with 11% fall
coming in last 3 months itself…
This
has caused a huge blow to the Indian Govt. because OIL is India’s biggest
import & oil price, although has remain range-bound in terms of dollar, but
because it takes our Govt. more rupees to buy 1 US dollar today compared to a
year back, the cost of oil imports has suddenly shot up catching the Govt.
unawares… in fact, this has been sighted as the main reason by our govt. to
increase the price of petrol this week…
The
Indian traveller who was planning to pack his bags and travel to US or the
Europe will think twice now as his cost of travel has suddenly shot up by a
good 15%...
Similar
is the plight of an Indian parent whose child/ward is studying abroad. This December
they are forced to pay 15% to 16% more fees compared to last year because of a
similar fall in rupee v/s the USD.
However,
the most pain is being borne by the poor Indian importer who would not have
imagined in his worst nightmare that he will have to pay upwards of Rs. 50 to
buy 1 USD. If you are a traveller, you can cancel/postpone your travel, if you
are a parent remitting education fees to your child studying abroad, you can pay
the higher rate for the dollar now hoping that by next semester, USD would be
much cheaper, but the pain is continuous and unavoidable for the Indian Govt.
and the Indian importer is in a more precarious situation as he cannot stop importing
good otherwise his business will stop growing.
However,
to repeat my quote above…a CRISIS for
one is an OPPORTUNITY for another…
No
awards for guessing who is the biggest beneficiary of the 15 % rupee depreciation?
The Indian EXPORTER…especially those who are exporting goods and/or SERVICES to
the United States…
The
Indian EXPORTER has had his diwali this year, not in the month of October
but from October till now with rupee depreciating by 8% to 10% since diwali and
their top line & bottom-line increasing in direct correlation to the
depreciation of the rupee vis-à-vis the US dollar…
Our
Indian Exporter is having a field day and the diwali is continuing till the
date of writing this article…
But,
besides the exporters, there are two more group of people who stands to benefit
directly & immediately from the 15% depreciation in rupee….
And
what more, if they play their cards well, they can benefit immensely from this
unwanted but unavoidable fall in Indian rupee…
Can
you guess whom I am talking about…?
Think
hard….what is missing from the graphic below???
|
Those who “LOOSE”
from the rupee depreciation
|
Those who “BENEFIT”
from the rupee depreciation
|
|
Indian Govt.
|
???
|
|
Importer
|
Exporter
|
|
Indian tourist &
biz travellers travelling abroad
|
Foreign traveller
planning to travel to India
|
|
Parents whose
children are studying abroad
|
???
|
Can you
fill in the blanks above…. besides the Exporters, which 2 communities stand to
benefit the most from the falling rupee??
Well,
let me break the suspense here….
The
1st is the Foreign Investor including the FIIs (Foreign
Institutional Investors) who have hordes of unutilised CASH lying idle in their
coffers in the form of US dollars…that’s one of the reason I am not very
concerned about the sudden fall in the Sensex…The FIIs, if they decide to
invest in Indian equities today, stand to make a cool, risk-free 10 to 15%
profit just by remitting money to India and converting USD to Indian Rupee…. So
what my teachers taught me in school has some truth in it…
“EVERY
CLOUD HAS A SILVER LINING”…
So,
if we re-visit the above graphic… you’ve got one of the answers….
|
Those who “LOOSE”
from the rupee depreciation
|
Those who “BENEFIT”
from the rupee depreciation
|
|
Indian Govt.
|
Foreign Investors or
the FII’s
|
|
Importer
|
Exporter
|
|
Indian tourist &
biz travellers travelling abroad
|
Foreign traveller
planning to travel to India
|
|
Parents whose
children are studying abroad
|
???
|
Now
I hope the FIIs read my BLOG, understand
the logic of 15%+ risk-free return that I am writing about and start investing
in Indian markets again….
But
alas, that’s wishful thinking… My BLOG readers are not FII’s and FII’s are yet
to become my BLOG subscribers, at least not in the near future…
So,
for who am I writing this article… who is going to benefit by reading this blog
article? Well YOU, my BLOG reader, if you know any NRI friend and/or relative and/or
business partner. And to speak more directly, my friends who are
residing/studying/working abroad… the NRI’s (Non-Resident Indian’s) and the
PIOs (Person of Indian Origin’s).
So,
now we complete the graphic above… finally…
|
Those who “LOOSE”
from the rupee depreciation
|
Those who “BENEFIT”
from the rupee depreciation
|
|
Indian Govt.
|
Foreign Investors or
the FII’s
|
|
Importer
|
Exporter
|
|
Indian tourist &
biz travellers travelling abroad
|
Foreign traveller
planning to travel to India
|
|
Parents whose
children are studying abroad
|
NRI’s
and PIO’s
|
Yes,
pick up the phone and give a call to
your NRI / PIO friend/relative/biz partner sitting abroad, with dollars
stashed away in his bank, probably worrying about his job, next salary, raise
or about his business prospect, envying you and us Indians that we are living
in the 2nd fastest growing economy when he/she/they are living in
economies struggling to stay out of recession and earning a meagre 2 to 3% on his
bank deposits when we Indians are earning 9%+ on our deposits.
Call your
NRI friend /relative / biz partner not to tell the above but to tell him that NOW,
since last couple of months; YOU & I have started to ENVY our NRI friend
working abroad…
WHY???? Here is the reason…
If I am
an NRI residing in US or Europe or for that matter anywhere else, having spare
dollars (or for that matter any other foreign currency) with me that I do not
need at least for a few months if not more, I shall immediately REMIT my
foreign currency savings to my NRE account and end up buying rupee @ Rs. 52.63 for every US dollar. Had I remitted
money last year or even 3 months back, I would have received either Rs. 45.48
per US dollar (1 year back) or Rs. 47.40 (3 months back) per USD…
So, by
remitting money NOW, I gain a cool 11.0% more compared to say 3 months back
& 15.7% compared to a year back…
Now, an
NRI has two choices after he has remitted money back to India.
Option
1: Start a
NRE Deposit account and earn 2.5% to 3.5% return on his NRE deposits which
actually is not bad as now his total earnings from this activity is a cool 18.5%
(15% earned on conversion to rupee+3.5% on NRE deposits)…
Not bad
compared to 3 to 4% max. that he/she
might be earning on their local bank deposits…
(PN: interest rates
earned on local deposits might vary from country to country)
However,
if your NRI friend is of the more intelligent kind who takes pains to do some
more research and /or takes professional advice from Wealth Mangers/Financial
Planners, here in India, he will go for option 2…
Option
2:
So
what is option 2?
Well,
step 1 remains the same. Transfer money to India by remitting your foreign
currency to your NRE bank account and convert your USD or any other foreign
currency to Indian rupee and pocket a cool 15% odd risk-free…
Step 2,
rather than depositing it into a NRE Deposit a/c, you INVEST the rupees so
earned into Debt-based Mutual Funds here in India….
Ok,
did you know that already???? So what’s stopping you my friend??? Are you not
happy with practically risk-free 20.0% + returns in one year?
There are
two unique events playing simultaneously in Indian economy that presents a
unique, never before, opportunity to our NRI friends to obtain / EARN a
practically RISK-FREE return of 20% odd….
Not only
the rupee depreciation is at its peak, even the interest rates in India are at their
peak. We all know that… you and I are earning upwards in the range of 9.0% to
10% per annum on our Fixed Deposits with banks (although I believe it is
foolish for an Indian do open a FD today… surprised, read my article “ The Rich
Man’s bank Accounts:….( http://niravpanchmatia.blogspot.com/2011/03/rich-mans-bank-accounts.html
)
I say
that because while FDs are giving us 9 to 10% pa they are taxed @ 30% however some
of the medium-term debt-based Mutual Funds in India are offering returns
in the range of 10.00% to 11.25% per annum…and are taxed @ 10% even if I may be
in the 30% tax bracket..
So step 2
for an NRI would be to INVEST his money from the NRE account to some of these,
well chosen, debt-based Mutual Funds in India.
He therefore
stands to gain a cool 25% to 26.50% returns on his surplus dollars that
otherwise were lying idle in his foreign bank account or earning a meagre 3 to 4%
pa.
Now,
a final graphic for you… the table below shows 1 year return in case of 3
strategies that an NRI can adopt with respect to his surplus funds…
|
|
NRI money lying idle
in his local bank a/c
|
NRI remits money NOW
to his NRE A/c & transfers it to NRE deposits
|
NRI remits money to
NRE A/c and Invests in debt mutual funds in India
|
|
Profit on conversion
of USD to rupee
|
0%
|
15.0%
approx.
|
15.0%
approx.
|
|
1 year return
|
3.0%
to 4.0% pa
|
3.0%
to 4.0% pa
|
10.0%
to 11.25 % pa
|
|
Total returns earned
after 1 year
|
3.0% to
4.0% after 1 year
|
18.0% to
19.0% after 1 year
|
25.0% to
26.25% after 1 year
|
Now, the
returns from debt-based mutual funds are expected returns but past 10 years record
shows that good, well chosen debt mutual funds have given returns as indicated within
a range of +/- 0.75%. Only one caveat here, please take professional help
before finalising the debt mutual fund for Investment.
So,
how is that for a neat 25% return over one year with very little risk …
Isn’t
it cool…. If you think so and agree with me, then I would request you to
forward this article to every NRI/PIO friend of yours… he will definitely thank
you from the bottom of his heart and probably gift you that ipad or the latest
iPhone4…
Now,
about DON2,
if
Shah-Rukh Khan can dare to bring out DON2, can I not write JAAGO NRI JAAGO part II…
Await
the sequel, as in my following article I am talking about NRI’s making a cool,
hold your breath, hold it, hold it, 50%+ returns….
Wait,
before you point a finger at me and raise doubts, this one is not without risks….it
is meant for NRI investors who fulfil the below mentioned conditions:
1.
- 1. They have the stomach to take risks
- 2. They are willing to INVEST for a longer time period of 3 to 5 years
- 3. They take professional advice here in India before creating their Investment portfolio
Yes,
a cool, 50% return in 3 to 4 years is not bad, is it????
Wait for
DON 2, I mean JAAGO
NRI JAAGO part II…
WATCH THIS SPACE…
QUOTE OF THE DAY:
If you buy things that you don,t
need,
Soon you will have to SELL things that
you need…
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