India Portfolio for NRI\'s

[VRG]

Bobus (and other Admins/experts),

I need help!! And I see there're quiet a few members like me (USC/GC subjected to PFIC) who're planning to return to India in next 2-6 yrs but want to start investing in their India portion of AAP.

We have had generic discussions in past regarding all kinds of investments in India but I wanted this thread to be specific to NRI's (e.g. USC/GC holders subjected to PFIC) India Portfolio (only Bonds/Stocks..no RE) who're currently (or next few yrs.not ROR) living overseas because USC who're now ROR can invest in PPF etc.

Following are the two categories:

Stocks/MF's: The simplest method is to invest in US Mututal Funds (e.g. Mathews) that invest in India but I believe if one has some time, better route is to have a DEMAT a/c and buy Indian Stocks and try to mimic an Index. Has anybody executed this in past?

Bonds (other Fixed Income): The laddered FD's is one way to go. Are there better instruments in this category? May be better from Indian Taxation point of view, so that the net return is attractive. I know there's a thread regarding some ETF's and zero coupon bonds but don't see anything latest or member's experiences in that thread

I don't have any knowledge in this area, would really appreciate help.

Thanks.

[shankar_ss]

hi,
Instead of trying to mimic index you can buy index funds in India, click on valueresearchonline.com which is a good site for indian funds,

The route for direct stocks is slightly cumbersome, you have to open a PIS a/c with your bank and use funds in that to buy thru any brokerage. you can not have more then one pis ac afaik,

[Admin Note: Unless a member requests, please no solicitation of business in posts. Your posts and help are appreciated, but we would like to keep posts free of solicitation of business - thanks, admin]

thanks
shankar

[VRG]

Thanks for your nore Shankar.

I 'm not sure whether investing in Index Funds in India is an option for us (USC/GC Holders) as they're subjected to PFIC. I have noticed that many of the USC/GC holders that are not aware of PFIC Rule invest in Indian Mutual Funds.

It appears that you're based in Chennai. Has any of the R2ICLUB members have used your services in past?

I was more of looking forward to other member's experiences investing themselves as most of us do in this blog and share experiences.

Thanks.

[VRG]

Has anybody done research for an India ETF: INP (iPath MSCI India Index ETN)?

It seems quiet promising.

Would it be a better option than Mathews India Fund?

Thanks.

[Desi]

Has anybody done research for an India ETF: INP (iPath MSCI India Index ETN)?

[/quote]

Yes. There was a discussion thread on this.

Would it be a better option than Mathews India Fund?

Thanks.[/quote]

In my opinion - No.

[Bobus]

Bonds (other Fixed Income): The laddered FD's is one way to go. Are there better instruments in this category? May be better from Indian Taxation point of view, so that the net return is attractive. I know there's a thread regarding some ETF's and zero coupon bonds but don't see anything latest or member's experiences in that thread.

Please feel free to read Posts 9 thru 12 of the following thread:

Exploring Investment in Indian Debt Mutual Funds without Inviting High PFIC Taxes

The thread above discusses the tax impact of a certain option [Option (iv) in the posts 9 thru 12] on a USC who has already R2ied and is in a low US tax bracket.

If someone

(a) has not yet returned to India
(b) wants India debt fund exposure now, and
(c) wants to try Option (iv) discussed in posts 9 thru 12 in the thread above

then

the same has to be done thru taxable account (because I dont know how one can do it via an IRA - perhaps this option will open up in a few years) and one shd be prepared to pay tax at a rate that is close to one's US marginal rate of tax.

[VRG]

Thanks Bobus.

I have read "Exploring Investment in Indian Debt Mutual Funds without Inviting High PFIC Taxes" link many times but somehow don't get very enthusiastic about it.

Following are some of the reasons:

1) As per #9, Most of the options ((i), (ii) and (iii)) are not attractive.
2) I see the calculations but don't see step by step approach of implementing (like fund names, channel etc) or other member's experiences in this regard.

It appears that (iv) option is better suited for "USC who has already R2ied and is in a low US tax bracket."

You mentioned "(a) has not yet returned to India
(b) wants India debt fund exposure now, and ..." which is my case. "the same has to be done thru taxable account". Are you referring to taxable/brokerage a/c in India or US?

I think ppl like me whose case is the opposite of "USC who has already R2ied and is in a low US tax bracket." might be fine with laddered FD's. Worst case, the return would be 1-2% less. I guess this would be ok for 4-6 yrs and might compensate for ease of implementation.

Also, I didn't see any response from you or other admins/sr members regarding "Stocks/MF's: The simplest method is to invest in US Mututal Funds (e.g. Mathews) that invest in India but I believe if one has some time, better route is to have a DEMAT a/c and buy Indian Stocks and try to mimic an Index. Has anybody executed this in past?"
I'm looking for step by step approach and/or other member's good or bad experiences. Is there a thread similar to subject of : "better route is to have a DEMAT a/c and buy Indian Stocks and try to mimic an Index"?

Thanks again.

[Bobus]

VRG #7:

I do not usually offer step by step approaches on anything - I leave it to members to figure that out.

Regarding Indian equity investment, the only two options I see for US residents, GC holders and USC are MINDX and investing directly in a broad portfolio of India stocks. I do not have an investment in MINDX or any direct investment in any India stock coz am not R2Ing, if at all, anytime soon. I invest in broad emerging market index fund (which invest in India, among other countries) and that is enough India equity exposure for me. So beyond saying MINDX and direct investment in India stocks are options, I do not have anything to offer. I dont think coming up with a broad portfolio of Indian stocks to invest directly will take much time, but others may feel it is difficult - it is upto them - it is their money, not mine.

Regarding India fixed income exposure, apart from bank FDs, there is option (iv) discussed in the thread that I refered to. If you think option (iv) has too many hassles, I dont have other ideas. Even with bank FDs, the interest income will be taxable at current US marginal tax rate. By "taxable account", I meant non-tax deferred accounts [non IRA or 401(k)] - the idea was to emphasize that current income will be subject to US tax.

[VRG]

Bobus,

I think you have enlightened me enough..:)

I'm planning to use my Indian Funds (currently in RE) to invest in Fixed income and Stocks. I'll work with some of my contacts in India to come up with portfoilo of Indian stocks and share the process here.

Let's hope this happens soon.

Thanks again for all of your help,

VRG

[Kumar]

Bobus,

I think you have enlightened me enough..:)

I'm planning to use my Indian Funds (currently in RE) to invest in Fixed income and Stocks. I'll work with some of my contacts in India to come up with portfoilo of Indian stocks and share the process here.

Let's hope this happens soon.

Thanks again for all of your help,

VRG

Hi VRG,

Could you please share any updates on Indian stocks/bonds portfolion. It will be useful for many others including me.

Regards