Showing posts with label Offshore. Show all posts
Showing posts with label Offshore. Show all posts

Friday 3 May 2013

Long term prognosis for the Indian Rupee is abysmal - time to increase exposure to US dollar denominated assets


The Reserve Bank of India (RBI) clearly fears inflationary pressures in India to the extent that it cut the repo rate only by 25 basis points today disappointing markets. RBI governor is quoted in the Economic Times as saying that "Conditional upon a normal monsoon, agricultural growth could return to trend levels. The outlook for industrial activity remains subdued, with the pipeline of new investment drying up and existing projects stalled by bottlenecks and implementation gaps." Persistently high current account deficit, credit growth falling to the lowest growth rate in over a decade, and now the RBI's own admittedly hawkish stance on inflation only add to an abysmal prognosis for the fate of the Indian rupee. Expectations that the Rupee will hit 60 to the US dollar are steadily rising. Government Pollyannas still try to come up with creative explanations to invent a growth story (see video).



As long as the RBI's Liberalised Remittance Scheme is still available to Indian residents, Indian or NRI investors are strongly urged to increase their portfolio exposure to US dollar denominated investments. You only have yourself to blame if your net worth significantly falls due to a sliding Indian rupee.

Monday 22 April 2013

End of the IT Outsourcing era approaching - Indian IT industry risks collapsing



One after another IT outsourcing industry bellwethers like Infosys and today Wipro have posted lower than expected revenues. Cognizant and HCL seem to be battling this downturn by firing employees to contain costs. As the Economic Times has opined, the industry needs to look for a new revenue model or risk dying out (also see graphic from the article). I will add that there is a fundamental shift in technology taking place such as the move towards cloud computing with the evolution of software as a service.



The long term trend for the IT Outsources if they do not change their model (and perhaps its too late now for them) seems to be on a slippery slope downwards towards irrelevance. Shorting these companies are more safely - staying away from them completely in your portfolios is highly recommended over the medium to long term.

Thursday 18 April 2013

Irrational exuberance continues to send Indian markets climbing



The Economic times reported today that the Indian stock market market has risen higher for the week by 770 points. As I have blogged before there really is no basis for this continued irrational exuberance. The finger of blame for this steadily inflating bubble can be pointed to portfolio investments flowing in though Mauritius which is simply money laundered overseas by tax dodging citizens through hawala channels and returned back as legitimate portfolio investments through Mauritius.



The other channel for laundering this money is right in India in real estate in the major cities of Mumbai & New Delhi where the bubbly property market has reached stratospheric levels long time ago. When these multiple bubbles burst...and burst they will...look for shelter outside India...

Thursday 11 April 2013

After Switzerland, UK and Channel Islands top the list of offshore domiclies


Funds Europe magazine reports that the UK and Channel Islands are at number two on the list of offshore domiciles, with assets under management of US$1,800 billion at the end of 2011. Switzerland still tops the list, with more than 80% of the funds held in Switzerland being for foreign clients.



India's new wealth tax surcharge of 10% on individuals with taxable incomes topping 10 million rupees will not work thanks to a well-established tax dodge wealthy people and corporations use that involves sending money to and from Mauritius. Under a tax treaty between India and Mauritius, companies based in Mauritius are not taxed on their investments in India. The Isle of Man or the Channel Islands may not have a similar tax avoidance agreement as Mauritius but they are certainly far safer havens (see video) to protect assets if return of assets is considered more important than return on assets.

Friday 5 April 2013

Changing tax haven scene - Switzerland and Caribbean trusts no longer preferred


The Economic Times writes today about the changing tax haven scene where traditional tax havens such as Switzerland, Liechtenstein and Caribbean countries are quickly dropping out of favor as their bank secrecy is rapidly eroded and they come under attack from aggressive tax agencies chasing tax dodging citizens. The article further posits that Singapore and Dubai may now be the tax haven of choice for rich Indians or NRIs looking to invest overseas.

I would argue against the choice of either Singapore or Dubai as the base for overseas investments for Indian residents or NRIs for the same cautionary tale told by recent events in Cyprus (see video clip above). Moreover, Singapore and Dubai are in restive neighborhoods and there is always a political risk from this geographical closeness. A better choice for overseas investment gateways for resident Indians and NRIs alike are the Isle of Man and the Channel Islands. Both these locations are protected under British Sovereignty and are very clean with transparent regulation.