With the rupee hovering around 96 to the US dollar, currency depreciation is becoming an increasingly important factor for NRIs investing in India.

While a weaker rupee means more rupees for every dollar remitted, it can also erode the dollar value of INR-denominated investments over time.

In an interaction with Kshitij Anand of ETMarkets, Sachin Sawrikar, Founder and Managing Partner, Artha Bharat Investment Managers IFSC LLP, said NRIs need to be more deliberate about allocating fresh savings to India and assess whether expected returns adequately compensate for currency, tax, liquidity and administrative risks.

He also highlighted the need to evaluate India exposure alongside the broader global portfolio rather than treating Indian assets as the default destination for fresh capital. Edited Excerpts –

Q) India continues to attract significant interest from NRIs. What are the biggest hurdles NRIs still face when trying to invest in Indian equities and mutual funds, despite the process becoming increasingly digital?

A) Onboarding's genuinely gotten easier, PAN, KYC, account opening, most of it is online now. But the friction hasn't gone away, it's just moved further down the process.

You still route every trade through an NRE or NRO account, and a lot of custodians and brokers treat that as a slower lane than a resident account. The paperwork never really stops either, FATCA and CRS declarations, repatriation documents, TDS certificates, requirements a resident investor doesn't face, and heavier than what most developed-market brokers ask for. A lot of mutual funds won't even take NRI applications from the US and Canada, the compliance burden isn't worth it to the AMC, so the shelf shrinks a lot for the two biggest NRI markets.

More broadly, NRI investing structures tend to be more constrained than resident ones from an operational and reporting perspective, fewer account options, less flexibility to shop across providers, and that shows up in cost, NRI brokerage often runs above what a resident pays for the same trade.

Put together, this isn't a digitisation problem anymore. It's the practical cost of investing in India as an NRI, one that's real even where the framework itself is sound. Worth weighing honestly before defaulting into Indian markets out of familiarity.

Q) With rupee hitting 96 per USD, has it impacted NRI investments into India? What is the general mood?

A) The rupee's been sitting close to that level for most of the year, and honestly, it should be worrying people more than it is. A weaker rupee eats directly into the dollar value of anything held in INR, and this isn't a one-off, the currency's been on a depreciating trend for decades.

Every rupee investment carries a currency short nobody actually chose. That doesn't automatically make India unattractive, but it raises the return hurdle every INR investment has to clear before it's actually worth the risk.

What surprises me is a lot of NRIs, especially in the Gulf, still see every dip as a chance to send more money home, without stopping to look at what depreciation's already done to what they're holding.

Yes, you get more rupees per dollar today, but every rupee sent home is already worth less than it was a year ago in dollar terms. Putting fresh money into rupee assets doesn't fix that, it just adds to the same exposure at a marginally better exchange rate.

The healthier shift, where I see it, is NRIs starting to ask whether an INR investment clears that higher hurdle once depreciation is priced in. My honest take, people need to be a lot more deliberate about how much they park in a depreciating currency, and the rupee's long-run trend is reason to think carefully before making INR assets the default destination for fresh savings.

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Q) For an NRI looking to invest in Indian stocks, how should one decide between an NRE and NRO account? What are the key differences from an investment and repatriation perspective?

A) Keep the mechanics separate from the investment decision, people conflate the two. An NRE account holds foreign income remitted into India, principal and returns fully repatriable, interest tax free. An NRO account holds India-sourced income, rent, dividends, property sale proceeds, capped at USD 1 million a year in repatriation, taxed at source. If you're going to hold Indian equities or mutual funds, an NRE-linked account is the cleaner setup, fully repatriable, no ceiling.

Whether an NRE fixed deposit itself makes sense as an investment is a separate question, and not one I'd fold into the account discussion. The account structure is just a repatriation-friendly banking rail. What you choose to hold inside it is a different conversation entirely.

Q) Are NRIs under-allocated to Indian equities compared with their overall exposure to India? Which asset classes do you think they should consider beyond direct stocks and mutual funds?

A) I'd reframe the question. The first thing isn't whether an NRI should add India exposure, it's whether they've measured what they already have. Most carry meaningful exposure through property, family businesses and rupee deposits, none of which gets counted when someone claims they're under-allocated. Count it properly and the picture usually looks different.

There's a second layer, opportunity cost. India can generate a good return, that's rarely in dispute. The real question is whether that return clears what the same capital could earn globally, once you adjust for currency, liquidity, concentration and administrative risk. An NRI's benchmark isn't the Indian investor. It's the global opportunity set.

There's a liability side too, usually skipped. A Gulf-based NRI planning to retire in India needs more INR exposure than one retiring in London, because their future spending is in rupees. Currency allocation should track where you'll actually spend the money, not just expected returns.

Where an NRI does want incremental exposure, I'd keep it concentrated in categories where India is genuinely differentiated, GIFT City PE and VC being good examples, rather than plain equities and mutual funds a low-cost developed market fund can match once currency is priced in. Worth saying plainly, private strategies carry their own manager risk, illiquidity and opacity. Not a free upgrade, a different risk taken deliberately.

Q) Tax is often one of the biggest concerns for NRIs. How should they think about the tax treatment of equity, mutual funds, bonds, FDs and alternative investments in India?

A) The headline rates are straightforward enough, equity LTCG at 12.5 percent above ₹1.25 lakh, STCG at 20 percent, debt funds at slab rate, NRO interest taxed with TDS deducted upfront. But the rates aren't really what should worry NRIs most. It's residency, compliance and administrative uncertainty.

I've seen multiple Gulf-based NRIs get pulled into residency disputes, TDS mismatches, reassessments and interest demands, despite genuinely believing their affairs were compliant. Even where the technical position eventually favours the taxpayer, the cost of getting there, professional fees, interest, years of back and forth, is real, and it's a cost a comparable dollar account back home typically imposes far less often.

Deemed residency provisions have added another layer to this, particularly for Indian citizens in low-tax or zero-tax jurisdictions like the UAE or Oman. The legal position depends on individual facts, but most NRIs underestimate how much residency analysis now matters, and how easily FEMA status and income-tax status can stop lining up the way people assume.

That uncertainty is one more reason to keep India exposure selective rather than the default destination for savings. Tax risk isn't just the statutory rate, it's how predictable the outcome is once a dispute actually starts. I've reduced my own India exposure with exactly this in mind, and I'd tell any NRI to weigh administrative risk alongside the tax rate, not instead of it.

Q) Are you seeing greater interest from NRIs in newer products such as AIFs, PMS, private credit, REITs and InvITs? Which of these could see the biggest growth in NRI portfolios?

A) Interest's picked up, and where it's concentrated tells you something. Category II private equity and venture capital strategies at GIFT City are among the more interesting draws for NRI capital, offering early access to Indian growth companies before they're investable through public markets. PMS has a smaller but steady following among NRIs who want a concentrated, actively managed listed portfolio. REITs and InvITs are picking up as a lower-effort substitute for direct property.

I'd flag one thing clearly though, private strategies tend to be more cyclical, harder to underwrite and less transparent than public markets, and they carry meaningfully higher manager-selection and liquidity risk. That's not a reason to avoid them, but it is a reason not to treat them as an automatic upgrade, access quality matters as much as the asset class itself. Among the differentiated opportunities in this group, PE and VC are the ones I'd expect to grow the most in NRI portfolios, precisely because they're the kind of narrow, differentiated exposure that justifies taking on India and currency risk at all.

Q) If an NRI has ₹1 crore of surplus money to invest in India with a 5–7-year horizon, how would you divide it across equities, fixed income, gold, real estate and alternatives?

A) This is my personal preference, not a template, worth saying upfront. Most NRIs already hold meaningful India exposure through property and family assets that never enter this conversation, so I'd start by asking whether fresh surplus needs a large India weight at all.

If someone's deploying it while still wanting some India exposure, I'd keep it light, differentiated, skewed toward growth. Something like 15 percent in high-conviction GIFT City PE or VC, concentrated and illiquid by nature, 10 percent in diversified equity funds biased toward mid and small cap, 10 percent in GIFT City private credit for yield that actually compensates for the risk, 10 percent in gold, and the remaining 55 percent in dollar assets, a US index fund plus a dollar-denominated GIFT City fund with genuine USD equity and fixed income exposure rather than money market. I struggle to find a role for fixed deposits here once depreciation is fully priced in.

That's a lighter India weight than most standard templates, and it assumes this NRI's future spending is largely outside India. Someone retiring in India should shift meaningfully more toward INR to match that liability.

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Q) Could we see more India-focused global funds or India-domiciled products in GIFT City designed specifically for overseas Indians who want Indian exposure without navigating multiple investment accounts?

A) There's room, but I'd define the gap differently. The industry keeps building more channels to pull NRI money into India, more feeder funds, more AIF structures. What's missing is the reverse, a GIFT City-domiciled global multi-asset fund letting an NRI hold US and developed market exposure through an Indian-regulated, IFSC wrapper.

The obvious question is why not just buy a US ETF directly, fair one. The answer is consolidation, one KYC, one regulated jurisdiction you already know, consolidated reporting instead of scattered accounts, cleaner estate planning for assets passing to Indian heirs. Doesn't beat the ETF on returns, but solves a real structural headache.

The biggest opportunity in GIFT City may not be bringing global Indians to India. It may be bringing the world to global Indians. That product barely exists, and building it is the direction I'd like to see GIFT City take.

Q) What new financial product is currently missing from the Indian market that could significantly improve the investment experience for NRIs?

A) The recurring mistake is confusing familiarity with diversification. Many NRIs hold India because it's familiar, not because they've worked out it's the best risk-adjusted destination for their next rupee of savings. Adding more of the same isn't diversification, it's concentration with an emotional discount attached.

The checklist, count all your India exposure, not just financial accounts. Work out where you'll actually spend the money in twenty years and let that shape currency mix. Adjust every return for what the rupee will likely do to it. Price in administrative and tax uncertainty alongside the statutory rate.

Where you keep India exposure, make it deliberate and differentiated, not automatic. An NRI's benchmark isn't the Indian investor, it's the global opportunity set. Many are surprised, once they run the numbers, at how much of India's apparent outperformance disappears in dollar terms.

The genuine product gap, tying back to Q8, is that GIFT City-domiciled global fund. Everything else in the market today is built to bring NRI money into India. Almost nothing is built to let NRIs hold the world through an Indian-regulated structure, and that's the honest gap worth closing.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)