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Having a seamless ecosystem for investing globally has made investing more interesting.
It enables us to invest in themes that are highly promising but are not available through Indian mutual funds. We already know that, because of the cap by the RBI on Global investing through MFs, almost all the options for investing in international funds have been closed. The only way to invest globally is through the Liberalised Remittance Scheme (LRS), which permits resident Indians to invest up to USD 250,000 per financial year.
In this highly uncertain world, it’s prudent to diversify your investments across geographies to avoid region-specific risks that can impact your finances. Moreover, by investing outside India, one can protect against the loss of global purchasing power due to currency depreciation of 3-4% per annum against the USD.
A few interesting global themes that one can consider:
1. UAE and Singapore-linked ETFs: Beyond tax advantages for high-net-worth individuals, these are the neutral zones where the West and East meet to conduct business when direct engagement could be politically difficult. While the UAE faces short-term regional geopolitical friction, its long-term growth trajectory remains strong.
2. Robotics and AI in China: China is advancing rapidly in industrial automation and factory robotics. Backed by energy surplus and infrastructure capacity, Chinese firms are leading the race in open-source LLMs. Tech restrictions from the US have pushed China to create its own technology in-house at a rapid pace. The icing on the cake is much lower valuations compared to US-linked AI stocks.
3. US Reshoring and Industrial Policy: The US government is offering huge subsidies and taking measures to bring manufacturing back to US soil. ETFs focused on these themes show promising growth potential.
4. Commodities: One can take exposure to various commodities (like Copper, Palladium, Sugar, Oil, etc.) via Global ETFs that invest in a specific commodity or group of commodities.
5. European Defence Transformation: Driven by shifting NATO dynamics, Europe is scaling up its domestic defence and security capabilities. In fact, the valuations in European defence firms remain much more reasonable than what we see in the domestic market.
Now, these are just a few of the many compelling opportunities available globally. However, evaluating valuations and deciding on the right portfolio allocation remain critical to building a balanced portfolio.
Also, understand the taxation impact of investing through the LRS route:
1. Tax Collected at Source (TCS): A 20% TCS applies on the investment amount exceeding Rs 10 lakhs in a financial year. Also, this is an advance tax credit (not a cost or loss), which you can claim back or offset when filing your income tax return.
2. Capital Gains Tax:
Long-term capital gains (LTCG): Investments held for more than 24 months are taxed at 12.5%.
Short-term Capital Gains (STCG): Investments held for 24 months or less are taxed as per your applicable income tax slab rate.
At Truemind Capital, we help people achieve peace of mind by managing their financial planning and investments in India and globally diversified portfolios.
For an introductory call, reach out to us at: https://www.truemindcapital.com/contact-us
