Are more and more Indians investing their wealth in the US?
Since the pandemic, Indians have been looking for safe havens for their money. One avenue that Indians have found an affinity to is US investments.
In 2021-22 there has been an outward remittance of 746.57 million as compared to $431.41 million in 2019-20. This is almost a 73% increase in equity and debt investments year on year. People have been parking their extra cash in US banks as well, in the wake of the rupee depreciating against the dollar.
Even Indian mutual funds investing in US stocks saw the impact of this increased interest in US investments. SEBI banned foreign investment by mutual funds in February last year, since it had breached the $7 billion limit. Although it was later lifted, this was due to a crash in the prices of US stocks.
All in all, US investments have been on a steady boom year on year.
Why have Indians begun to prefer investing in the US stock market?
Big Tech and Emerging TechThe US is home to the biggest companies in the world. This list includes Tesla, Amazon, Meta, Apple and more. These behemoths are trading at an all-time low because of the tech stocks correction in the market. This is good news for Indian investors. This has fuelled the Indian investors’ aspiration to be part of their growth. You can invest in these companies through the Fi Money app.
Additionally, we can quite safely put our bets on emerging tech companies to be the next MAANGs of the world. This includes companies like Databricks, Snowflake, Nvidia and more, and are all listed in the US stock market. Investing in these companies now would mean getting an early movers advantage in terms of the prices you can buy them at. This makes them all the more alluring.
Diversification and Volatility
One of the most important reasons for Indians investing in US stocks is diversification. The US markets have a low correlation to Indian markets. Meaning, they don’t move in the same direction. Over the last 20 years, the US and Indian markets have had a correlation of 0.1 to 0.2 (adjusted for foreign exchange rate). This makes the US equity market an ideal hedge against the Indian equity market.
It is also a hedge against the falling Rupee. The rupee has been performing poorly against the dollar in the past few months with the fear of a recession looming around. This has increased the investments and deposits Indians have made in the US.
The US market is also less volatile than the Indian market in the long run, historically speaking. Indian indices have shown far bigger swings over time. This is a measure of risk. In the last ten years, the Dow Jones Index volatility was 3.92%, while the BSE Sensex volatility was 5.06%. This is an important factor since if you are in a more volatile market, a market dip might compel you to sell early.
Fractional Shares and size of the market
Another big advantage of investing in US stocks is fractional shares. Fractional shares allow you to invest in a part of a share instead of having to buy the whole share. This gives you the opportunity to invest in the biggest companies which would otherwise be outside your budget. On the Fi money app, you can buy US shares starting at Rs. 1000 , from right here in India.
In terms of size, the US stock market way outsizes the Indian stock market. It is nearly 8 times the market capitalisation of the BSE Sensex. You get the chance to invest in a bigger, more vibrant market.
What does the future hold for US markets?
The US stock market has always had a reputation for being the best place for investors around the world to bet on. This can be due to its massive size, the relatively moderate volatility or just the fact that all the biggest companies in the world are listed there. The fact that the US dollar is the world’s reserve currency is also an incentive to invest in the US stock market - since you are consequently investing in the USD as well.
But the best is yet to come for the US markets. While big techs have held their place and will continue to do so, there is a wave of new tech companies that are going to stand alongside them in the coming years. This includes cloud computing networks, and AI and machine learning services. Microsoft’s Azure (Amazon’s AWS business), Confluent, Hashicorp and more are going to be huge in the coming years.
All these reasons, together with the global forces in action, should explain the mammoth outflow of foreign remittance to the US. India seems to have caught on to this wave at the right time, and you can too. Fi Money helps make these US investments easier.
With paperless account creation, 0 brokerages and commission, 0 withdrawal charges, you can buy and sell US stocks conveniently. Another advantage of the Fi Money app is its real-time buying and selling feature. In the past, it was difficult to time the market, since buying and selling at live prices was not possible. Fi's real-time buying feature is enabling Indians to act quickly and time the market to their advantage.
This is the best time to hop on to US investments, and Fi Money helps you do this without any hassle.
Moneycontrol Journalists were not involved in the creation of the article.
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