With more and more brokerages offering a platform to trade and invest in the US market, a large number of India's retail investors appear to be ready to bet on US equities.
A social media poll conducted by Moneycontrol showed that as many as 65 percent of the total respondents on Twitter said they will invest in the US equities.
On Linkedin, this percentage was at 66, indicating that the retail investors of the country are looking for opportunities in offshore markets, too.
Data from Google Trends reveals that the search term “FAANG company” has seen a breakout in India from April — the first full month of the nationwide lockdown — to date.
FAANG is an acronym that refers to the stocks of five prominent American technology companies: Facebook, Amazon, Apple, Netflix, and Alphabet (GOOG) (formerly known as Google).
Media reports have been suggesting Indian equity investors, who are known to always keep a close watch on most blue-chip stocks that form a part of the Sensex and Nifty, are increasingly tracking US stocks as well.
“Investors want to invest in new-age technology companies and while India offers such opportunities, there are more opportunities in the international markets,” said Arun Chaudhry, Head, Online Business & Product Development, Motilal Oswal Financial Services.
“Indian investors are now conscious of the fact that diversification of portfolio is important. The newer investors are regular users of companies like Netflix, Amazon and Google, among others, and so know the potential,” he added.
ICICI Securities (I-Sec) on August 17 said it had joined hands with Interactive Brokers LLC, a US-based online brokerage firm, to offer its customers the opportunity to invest in the US markets digitally, tapping the growing interest of Indian investors in the American equities.
Axis Securities, a subsidiary of Axis Bank, on August 18 announced the launch of Global Investing, a smart solution platform for Indian retail investors to help them invest in the US stock market.
What does it mean?
In simple terms, now you can invest in US equities using one of the platforms provided by the brokerages.
Diversification of bets by investing in the international markets is helpful when the domestic market is volatile or witnessing a correction.
However, experts point out that even though the gates are now open for domestic investors to look for opportunities outside, it will not have any significant impact on the Indian market.
"At best, it may result in some outflow of HNI money. US equities are mostly expensive and India's retail investors prefer to play in small and mid-caps to gain big," said G. Chokkalingam, Founder and Managing Director of Equinomics Research & Advisory Services.
Chokkalingam pointed out that domestic investors are more comfortable in tracking the newsflow of the Indian market. Tracking developments of US companies is difficult for many.
The US markets are one of the best-performing markets at this juncture as it has recovered better than their global peers in the wake of COVID-19 pandemic.
In the short term, it is possible that the high valuation of US equities will make it less attractive.
Read more: Not FAANG, but Indian investors are lapping up ‘FAAMNG’ stocks
Should you invest in US equities?
They say there is always a ‘Bull Market’ somewhere in the world, even as there is a ‘Bear Market’ elsewhere at the very same time!
Experts highlight that an investor should diversify across industries, asset classes, and markets. Most Indian investors have a domestic bias as they mainly concentrate on Indian stocks and mutual funds, missing out on global growth opportunities.
Investing in international stocks/funds allow investors to benefit from international growth stories and diversifies/reduces the risk associated with an investment in a single country, especially in times of market volatility due to domestic factors.
However, US equities do not only mean Amazon, Google, Facebook and Microsoft. Before you take a jump into the US markets, you need to do the same level of research that you do for the domestic equities before investing.
Deepak Jasani, Head of Retail Research, HDFC Securities, points out that geographical diversification through equities will not eliminate positive correlation with the Indian market entirely as it is not a separate asset class altogether; it is horizontal diversification and a part of investor’s equity allocation.
"Countries, economies and their stock markets have become highly interconnected. Indian markets are highly sensitive to foreign fund flows and thus global sentiments apart from India Inc’s fundamental situation," he said.
US markets are big so the opportunities are also in plenty. Roughly, US equity markets are the largest in the world, with a market cap of around $30 trillion, representing around 35 percent of the global stock market capitalisation.
Vikas Gupta, CEO & Chief Investment Strategist, OmniScience Capital highlighted that US-listed companies, as a group, can be considered truly global with more than 40 percent revenues coming from international markets such as Europe and Asia.
Ideally, it should not be the question of whether one should invest in the US equities or not. It is about, if you know the fundamentals and if you see the opportunity, you take the call.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.