Asset Management and Investment
Investment in Equities & Commodities
Investment in equity represents investments in shares of a company whether such company is listed or private. Sometimes the investment in equity may broadly represent an investment in bonds and other similar instruments.
On the contrary investment in commodities involves investment in stocks and futures representing gold iron, wheat, grams, and similar commodities.
The legal framework for the administration of foreign exchange transactions in India is provided by Foreign Exchange Management Act, 1999. Under the Foreign Exchange Management Act, 1999 (FEMA), which came into force with effect from June 1st, 2000, all transactions involving foreign exchange have been classified either as capital or current account transactions. All transactions undertaken by a resident that do not alter his or her assets or liabilities including contingent liabilities outside India are current account transactions.
In terms of Section 5 of the FEMA, people resident in India are free to buy or sell foreign exchange for any current account transaction except for those transactions for which withdrawal of foreign exchange has been prohibited by the central government such as the remittance out of lottery winnings remittance of income from racing oblique riding, etc.
Liberalised remittance scheme (LRS)has been issued under FEMA. Under the liberalised remittance scheme all resident individuals, including minors are allowed to freely remit up to USD 2,50,000/- per financial year(April to March) for any permissible current or capital account transaction or a combination of both.
There are no restrictions under the liberalised remittance scheme on the kind of quality of the debt or equity instruments an individual can invest in. No ratings or guidelines have been prescribed under LRS of USD 2,50,000/- on the quality of investment an individual can make.
Therefore, it is open for any resident to invest in any equity or commodity in the international market within the limit prescribed by the LRS scheme.
A potential investor can take this opportunity if he/she is intending to invest in international markets which provide high returns and carry a reasonably low risk compared to domestic investments. Furthermore, the advantage of investment in equity abroad is the security from foreign exchange fluctuations. An investor can convert Indian rupees into any foreign currency say dollars and invest the dollars in equity instruments. So long as the dollar remains strong, investors can enjoy the benefit of both having exposure to the dollar currency and as well as international investment inequity.
Dubai is considered to be the financial centre of the region. There are varieties of options available to investors in Dubai through which an investor can consider investing in equities and commodities that provide high returns and a calculated low risk.
According to the India-UAE Bilateral Trade and Investment Report, jointly published by the Indian Business & Professional Council (IBPC) and KPMG, trade between India and the UAE is projected to reach about USD 100 billion by 2030, registering significant growth from trade volumes worth USD 180 million in the 1970s and USD 60 billion in 2019, and reinforcing the strong potential for business between the two countries.
While FDi Markets (Financial Times) estimates that cumulative bilateral FDI flow between the two countries from 2003-2021 is valued at over USD 57 billion, according to the UAE Embassy in India, the cumulative bilateral FDI stands at USD 67 billion.
The Indian Embassy in the UAE estimates that the UAE’s investments in India are about USD 17-18 billion, of which over USD 11 billion is in the form of FDI (2000-June 2021). The majority of India’s FDI has been in the coal, oil and gas, and real estate sectors, while the UAE’s FDI has primarily flowed into real estate and ceramics and glass.
India is the second largest trading partner of the UAE, whereas the UAE stands as the third largest trading partner for India, as of 2019. Petroleum products and gems and jewellery account for the majority of trade between India and the UAE (2016-2020).
MIA provides end-to-end solutions in advising investors on investment avenues available in Dubai Bahrain and Saudi Arabia. These include solutions on remittance from an Indian account to an account in Dubai, showcasing investment options available in equities and commodities, managing those investments, providing regular reports to investors, helping in exit from the investments, and bringing back money into India.