Financial transactions within family: Maintain record to avoid I-T notice

The Hang Seng index has risen 18.8 per cent in the past three months and 43.1 per cent over the past year. China-focused mutual funds available in India have delivered between 21 and 69 per cent returns over the past year.

- SANJAY KUMAR SINGH & KARTHIK JEROME

Diversify across emerging markets

Exposure to China allows Indian investors to diversify beyond domestic markets. "Investing beyond one's home country enhances portfolio diversification," says Niranjan Avasthi, senior vice-president, Edelweiss Mutual Fund. "Indian investors get exposure to sectors not well developed in India," says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors.

A volatile market

China's markets have long been volatile. "It has often been impacted by sudden policy shifts," says Avasthi.

This unpredictability poses risks even to long-term investors. "A sector might be doing well and then the government could intervene, completely upending its prospects," says Arun Kumar, vice-president and head of research, FundsIndia.com. Technology and education sectors have faced sudden regulatory crackdowns in the past.

Demographics are another concern. "The population is ageing rapidly due to the one-child policy implemented decades ago," says Dhawan.