How should I invest in the Indian stock market?

I would like to invest in the Indian stock market to diversify my portfolio which is in cash, assets, and insurance currently. How do I go about it? How much should I invest and in what stocks? I would like to start with Rs1million.

To start with, depending upon your understanding of Indian and global stock markets, you may choose to invest part of the available proceeds in index funds once the market cools off. For the balance amount to be invested in Indian stocks we suggest that you do your own research to evaluate the performance of sectors that are resilient and then choose large cap or mid cap stocks accordingly. Ideally, you may also wish to explore a systematic investment plan, to initiate investments in target company shares on a monthly basis and accumulate them over a period. Investments for a sustained period lead to considerable benefits if you set target returns, continue to review the performance of your investments from time to time and encash these returns when targets are achieved. In the medium term, if the dollar continues to weaken, commodities may rally and so would stocks.

From your query, we understand that your portfolio does not include exposure to precious metals. If that is the case, you may also wish to invest part of the available proceeds in precious metals.

Investment in stock markets is always subject to market risk and you should continue to review your investment portfolio periodically.

I have a stable job and earn Dh 13,000/month. I want to avail of a loan of Dh250,000 to complete my house in my home country Nigeria. Is it advisable to apply for a home loan here in the UAE or in Nigeria?

Generally, currency exchange rates for African countries tend to weaken against the US dollar and so is the case for Nigeria. On the other hand, currency exchange rate for UAE dirhams is pegged to the US dollar. While it may be easier for you to apply for a loan in UAE, it may not be an ideal option for you considering currency exchange rate risk that you may be exposed to. Your repayments in UAE would be pegged considering the exchange rate of UAE dirhams to US dollars while the exchange rate in your home country may continue to weaken. On the contrary, if you are to borrow money in your home country in local currency you may choose to remit funds from UAE on a monthly basis to service your loan instalment and you tend to gain when the local currency weakens against the dollar. You may also be able to offer your house in the home country as collateral and the bank will generally accept immovable property as collateral and offer you a loan with a long-term repayment option.

In terms of monthly repayment instalment amount, you may consider a threshold of 20 per cent of your net monthly take home pay. Considering this repayment threshold and the tenure of loan that you intend to opt considering your age, you may calculate the maximum loan amount that could be availed. While you are opting for a loan, also ensure that you set aside part of your monthly salary as reserves that you may access when needed. Borrowing in your home country in the local currency is certainly advisable.

— The writer is CEO of ZTI Global

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