India’s investment environment appeals to domestic and NRI investors alike, but it has not come without its own challenges. Investors need to decorate the shaking of markets, currency fluctuations, and global economic changes. Investor sentiment was a hit in the recent revision phase in the Indian market. As a result, many of them try to time the market. But it’s not easy to spend time on a market that travels in unpredictable cycles and makes short-term bets a dangerous proposition.
Many investors try to chase the peak and avoid dips, but ultimately make costly mistakes. A smarter strategy is rupee cost average (RCA), allowing investors to take advantage of market volatility without getting caught up in short-term noise. Instead of worrying about when it’s the right time to invest, the RCA will keep its investments, absorb market shocks, and accumulate wealth steadily over time.
Understanding RCA
RCA is a disciplined investment strategy in which a fixed amount is regularly invested regardless of market conditions. This means that when the market price is low, more units will be purchased, and when the price increases, fewer units will be purchased. Over time, this strategy eliminates the average investment in units and protects investors from short-term fluctuations. Consider an NRI that invests £25,000 a month in an equity mutual fund via a systematic investment plan (SIP). If your Net Asset Value (NAV) is £100, you will purchase 250 units. If your NAV drops to 80 pounds, you’ll buy 312 units. If the NAV rises to 120 pounds, you will buy 208 units.
This approach will help NRIS steadily accumulate wealth while reducing risk, instead of eliminating the market or thinking about when to invest.
For NRI
Reduce market volatility
Market movements are unpredictable and for NRIs, who do not closely track the Indian market every day, it is unrealistic to stay up to date with all fluctuations. The RCA ensures that investments continue uninterrupted, eliminating the need to make impulsive decisions during recessions. By sticking to a pre-set investment plan, they can benefit from market modifications.
Currency risk management
NRI also faces an additional layer of uncertainty from forex fluctuations. Transferring money from overseas can affect the actual investment costs of the rupees in investors’ housing currency. RCA smoothes this risk by spreading transactions over time and reduces exposure to adverse exchange rate movements.
India’s long-term growth
India is one of the fastest growing major economies. NRIS investments can benefit from this long-term growth without worrying about a short-term economic slowdown. A mutual fund, ULIP or other investment vehicle, RCA ensures participation in India’s economic progress with minimal stress.
Disciplined Financial Goals
Many NRIs invest in India with long-term goals in mind. It could be a retirement plan, building a real estate portfolio, or ensuring a future education for your child. The RCA is consistent with these goals by instilling discipline and preventing emotional investment. Instead of estimating market movements, NRIS can focus on the power of steady capital accumulation and compounding interest.
At its core, RCA is to maintain a stable investment approach, even when the market fluctuates. This prevents classic investors from panic sales in slump and overinvestment at market peaks. During market corrections, investors tracking RCAs will automatically purchase more units at a lower cost.
As Indian markets continue to evolve, those who continue to invest with a long-term vision may see the best results.
RCA provides NRIS with the right balance between risk management and wealth creation.
(The author is Chief Business Officer of Life Insurance, PolicyBazaar.com)
Released on April 14, 2025
