What Makes Global Markets Attractive?

Ashma comes with established industry experience and a successful track record of over 15 years. Her core strength lies in her extensive knowledge of global and Indian capital markets as well as her strong network with industry stakeholders

With upward mobility of the urban middle-class and more income at disposal, Indian investors are increasingly looking to diversify their investment portfolio. Thus, equities have become a new favourite. Especially over the past year, a rising trend in investors looking at products around US-listed equities has become visible. The need for such diversification is also necessitated by market volatility, brought about by the COVID-19 pandemic. Not to mention, a wide array of benefits that investors can get from a well-diversified portfolio.

For one, equity markets in developed nations are comparatively more stable than it emerging market peers. The interests of small investors are better protected as companies guide by stricter corporate governance norms. Besides, if investments are spread out across geographies, the volatility in one can be offset by the stability in another. Since the correlation between different markets is low. There is also space for a small investor with limited capital to invest in stocks outside India through fractional trading.

Global diversification also comes with the dual benefit of superior markets and stronger currencies. Currencies in developed markets are generally stronger and appreciating against the basket of currencies in emerging markets. The Indian rupee, for example, depreciated 44 percent against the USD in the last 10 years. Indian investors buy stocks in Indian rupees, but the US stocks are denominated in US Dollars. This helps to protect INR wealth from eroding when the US dollar is rising. This depreciation in the Indian rupee is cushioned well by global diversification as dollar denominated.

Global diversification also comes with the dual benefit of superior markets and stronger currencies

By exploring global markets, especially the US, investors get an opportunity to take home a slice of iconic companies in areas such as healthcare, new technologies, science, and analytics and many others. Companies of Google, Facebook, Tesla, Netflix, Apple, and Samsung become a click away for investors. They can take part in the growth stories of these companies and benefit from their different phases of evolution & expansion.

Additionally, the window to the world’s largest markets, the US, opens-up for Indian investors the moment they decide to diversify. US listed companies account for around 35-40 percent of the world’s marker capitalization, not to mention, the US’s economy is 10 times bigger than India’s. Therefore, the US could be a stepping stone for any investors looking to explore global markets at any point in time. The experience in US equities would boost investor confidence and world view as much as it would bring in benefits that are typical to geographical diversification.