40% jump in demat accounts in 5 years
NEW DELHI (TIP): Domestic investors may be sitting on the fence, but NRIs seem to be actively buying up Indian shares. At least going by the number of non-resident Indian investors who have opened demat accounts in recent years. The number of demat accounts held by NRIs with the National Securities Depository has risen 40 per cent in the last five years. It is now 1.35 lakh, up from 97,000 accounts in 2008.

The total number of demat accounts (domestic and overseas investors put together) rose by a little over 29 per cent in this period. Also, 80 per cent of the 1,800-listed stocks on the NSE today have NRI investors compared with 69 per cent five years ago.

Domestic mutual funds too have seen a rising NRI interest; non-residents account for about six per cent of the total assets under management by these institutions. What is driving NRI interest in India? Satish Menon, Executive Director at Geojit BNP Paribas, which has a large presence in West Asia, says many NRIs from Saudi Arabia and Oman, who make enquiries, are optimistic about India.

“Even at 5.5-6 per cent growth, they think India is a safer and more lucrative market to invest in. They are a conservative bunch and look for bluechip stocks to invest.” NRIs have turned to India also because of the recent de-regulation of deposit interest rates, says Mr B. Gopkumar, Executive Vice-President of Kotak Securities.

“The RBI’s move on liberalising interest rates on NRE deposits encouraged many non-resident Indians to remit money to India. A percentage of this is flowing into the equity market.” In terms of market-cap, Infosys, Reliance Industries and ITC figure on top of the NRI portfolio.

Where they invested
Recently, however, NRIs have increased their exposure to defensive sectors such as consumer durables, FMCG and pharmaceuticals. They have trimmed holdings in cement, capital goods and infrastructure companies. Grasim Industries, Prism Cement, Parsvnath Developers, AIA Engineering, ABB and Container Corporation are some companies where the number of NRI shareholders has dropped significantly.

NRI interest has declined in Reliance Infrastructure, Reliance Capital and Reliance Communications. These have reported a fall not just in the value of NRI holdings, but also in the number of NRI investors. Reliance Industries, however, remains among the top 10 picks for these investors.

However, rules stipulate that no individual NRI can hold more than five per cent of the paid-up value of shares of a company.Also, total holding by all NRIs put together in an Indian company cannot exceed 10 per cent of the paid-up capital (this ceiling can be raised to 24 per cent under certain conditions).