Opportunities abroad for Indian Investors: How global investment trends impact equity portfolios

Nasdaq and S&P 500 have both set new records in 2024. Meanwhile, markets await the 2024 Santa Claus rally, and it remains unclear how it will play out amidst Trump’s return to power and the US Fed’s rate cut campaign.

Indian investors have been investing abroad, particularly in the frontline blue-chip US stocks. Diversifying across geographies helps investors to manage equity portfolios in the long run. Diversifying in global markets is a beneficial strategy for savvy investors, as it helps mitigate political, economic, and currency risks.

Samir Bhandari, Co-Founder and CFO- hBits in an interview with Financial Express Online talks about the opportunities abroad for Indian investors and about managing risk during market volatility.

How have been the ‘Magnificent Seven’ firm results, and what should investors take away from that?

The ‘Magnificent Seven’ firms have given varied returns so far this year. For instance, the phenomenal 180% performance at Nvidia has been led by its leadership in AI and high-performance computing. Meanwhile, Meta and Amazon delivered strong returns of 60% and 35%, respectively, as their gains were mainly boosted by advancements in digital advertising and e-commerce. Tesla was mostly flat, up only 2% ( till Trump’s victory), while Microsoft rose 11.5%, below market expectations. Google and Apple gained 24% and 22%, respectively, keeping pace with the S&P 500’s market returns. Edit: Tesla is up over 30% since Trump’s Victory.

Therefore, instead of a single sector or firm, investors would do well to diversify in highly promising industries such as technology where different growth paths are there. Diversifying within sectors with such high growth potential helps capture growth at different levels but keeps the risks at lower levels by investing in firms that have good fundamentals and an innovative strategy.

Other than the US, where should the Indian investor look to invest?

Indian investors are increasingly looking toward developing markets such as Southeast Asia and parts of Europe for investments. For instance, the manufacturing, technology, and green energy industries flourish in Southeast Asia with favorable regional growth and incentives on the part of governments that foster these sectors. Infrastructures and technology investments by the UAE and Saudi markets also open the doors of the said market further to the global investor, making the regions even more appealing to Indian investors, and diversifying their exposures from the US and European shores.

What are some big global investment trends impacting Indian investors?

Global investor sentiment is now shifting towards sustainable and impact-driven investments. With climate risks becoming increasingly significant, we see rising investment appetite in companies and assets based on ESG principles. This trend is slowly influencing Indian investors who are integrating sustainability into their approach. There is also an inclination toward tangible assets, like real estate, which generate stable returns. We expect that Indian investors would increasingly align a growth-oriented tech investment strategy with safer, income-generating assets.

How would you advise to manage risk and seize global investment opportunities during periods of volatility in the market?

Risk management during volatility starts with diversification. My suggestion for Indian investors would be to diversify their capital among a combination of asset classes such as equities, bonds, real estate, and alternates. Geographic diversification is the process of dispersing assets across regions to not be overly reliant on the performance of one market.

Another strategy would be portfolio balancing, wherein high-risk assets are balanced by stable investments, achieved through routine portfolio rebalancing. Keeping in step with changing global trends will also ensure that investments make prompt and informed decisions.

How does a shift in the global regulatory landscape affect investor behavior, and which geographies can be made more investment-friendly as a consequence?

Global regulations that have implications on regulation such as transparency with a view of protecting investments have altered investment landscapes globally. For instance, as the regulatory progress made is concerned, the UAE and Singapore have become a hot destination for foreign capital in recent times.

In view of the long-term prospects of growth, Europe does gain an edge, also because it focuses more on the regulation of sustainable finance into segments that are in line with the ESG goals and those that meet the sustainability requirement of an investor.

The picture of China is mixed because the government has been opening up some sectors to foreign investments gradually while keeping regulatory uncertainties in place, especially in the tech and real estate sectors, which makes investors more cautious.

However, strong local demand and policies boost interest in strategic sectors of the future such as renewable energy as well as consumer goods, such as in the Chinese sector. Indian investors are always cautioned to observe that any regional area with dual capabilities along financial objectives with supporting safeguards will give easier access to lucrative opportunities.