One of the key reasons why offshore investments are gaining traction is due to protection against INR depreciation. Due to higher inflation, India will always have depreciating bias against hard currencies (i.e. Dollar). INR has depreciated at an average of 4.5% p.a. against dollar for the last 45 years. In addition, a risk of larger, disorderly depreciation driven by geopolitical issues remains.
Higher education at premier institutions abroad or to avail global healthcare facilities are other top reasons for UHNIs increasingly opting for offshore investments. By investing in foreign assets generating foreign income acts as a hedge for these expenses.
Offshore investments also offer access to wider opportunities by providing access to new innovative businesses Investment offshore also helps Indian UHNIs & HNIs to reduce portfolio volatility as developed markets (DMs) have lower volatility and mixing them with Indian market reduces volatility and increase returns. Developed Markets also have lower overall risks from macro, currency, and politics relative to Emerging Markets.