The Average Market Cap of the Top 100 stocks listed on the NYSE and Nasdaq is much higher than the Average Market Cap of the Top 100 Indian listed Companies.
Nifty 50 is nearing levels of 16000 and you could be sitting on some hefty gains. While the long-term prospects of Indian stocks look decent, there’s a good enough reason to diversify your portfolio with international stocks. The best part of investing abroad is that it brings in the required diversification that helps your portfolio to generate a high risk-adjusted return in the long term. And, one market that remains the undisputed leader and is the growth engine of the global economy is the US market. Diversification across geographies helps during times when economies show varying degrees of growth potential.
The US stock market offers several money-making opportunities to the Indian investors. From the mega-tech stocks listed on Nasdaq 100 to the home-grown US stocks of Dow 30 to the small-cap stocks of Russell 2000, the opportunities are endless.
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For those Indian investors forming their core portfolio with large-cap Indian stocks such as ICICI Bank, TCS, Reliance etc, adding the large-cap US stocks could be an option. “The Average Market Cap of the Top 100 stocks listed on the NYSE and Nasdaq is much higher than the Average Market Cap of the Top 100 Indian listed Companies. This is due to the large size of these companies and the addressable market opportunity which is global. When an Investor invests in a large cap, the risk and the volatility is much lower than the Mid or Small Caps,” says Ashish Ranawade, Head of Products, Emkay Wealth Management.
When it comes to Indian companies, the market for them is largely restricted to the domestic economy although exports do form a sizable portion of their revenues. Compared to this, some of the US firms hold a higher potential for their shareholders. “Many of the US listed companies address a large global market and are the market leaders in their segments. This offers tremendous growth opportunities as compared to Indian Companies and Significant Scale. Very few Indian Companies Offer this. Example, Amazon, Google, Apple, Nike, Mastercard, Louis Vuitton, Lockheed Martin etc..” informs Ranawade.
The future will belong to the more innovative companies and ones which are technology much advanced. The unique opportunities that some of the US stocks have to offer to investors should be grabbed by Indian investors as and when they come. “ Indian companies are lagging behind in technology whereas US listed companies are way ahead in terms of technology and their business models. Many of these are at the forefront when it comes to Space technologies, Defence, Data Science, Machine Learning, Artificial Intelligence, Bio-technology and Pharma, Electric Vehicles, Environment, Materials etc. The US economy has a very vibrant Private Equity and Venture Capital Space which enables these companies to source capital and list on the exchanges way ahead of time,” says Ranawade.
What’s better than buying stocks at cheaper valuation and selling it at a higher level. This kind-of differential is available for some of the parent companies whose Indian subsidiaries are listed in India. “Many of the consumer companies and technology companies are available in the US at attractive valuations. Example, the parent of Nestle, Unilever, 3M etc are available at much lower valuations as compared to their Indian Subsidiaries,” informs Ranawade.
By opening a US trading account here in India, the US stocks are no more out of reach. While the account opening process is quick, you can start buying Facebook, Tesla or Google shares with a few clicks. Trade or invest, the US stock market provides ample opportunities to grow your money over the long term.