Wall Street is in the grip of bears and the bulls are not gaining much confidence in the current economic environment. Inflation is rising with US inflation at a four-decade high and there’s no sign of peaking yet. Since January, the leading US stock market indices, S&P 500 and Nasdaq are more than 20 per cent lower from their recent highs – a bear market indicator.
Winvesta in its quarterly Investor Pulse Report states that the first half of 2022 has been forgettable for global equities. The supply-chain woes and persistently high inflation have started to hurt demand. The first six months have also been the worst for Wall Street in five decades.
Correction in the markets has impacted Assets Under Management (AUMs) of international funds in India. AUM at the end of May 2022 stood at Rs 39,000 crore. However, the number is lower than the December 2021 AUM of Rs 45,655 crore.
On the bright side, many high-quality stocks in the US are now available at a discount.
The Association of Mutual Funds in India (AMFI) has greenlighted Asset Management Companies (AMCs) to resume subscription to overseas funds. Such was the interest among Indian investors to invest overseas, that regulators stopped fund houses from taking fresh deposits earlier this year.
Indian investors can access the equity markets in the US for as little as $1. This has made themes like electric mobility, and innovation ETFs which are not easily available to invest in India, come within reach of an average retail investor.
Not only equities, there has also been a significant jump in ETF investment. In the earlier days, investing beyond the country was only within the limits of the urban elite. With changing times and easier accessibility, investors from tier-II and tier-III towns are also making their presence felt.
What to do
For long term investors, the lower valuations provide an opportunity to pick or add good quality stocks in the portfolio. If stock picking is looking difficult, taking exposure through ETFs could be the way forward. Equities, as has been seen in the past, tend to drift upwards over the longer term. US stocks allows investors to diversify their portfolio geographically.