New Delhi: After the major stocks crash in March, investors rushed to domestic equities to capitalise on the golden opportunity to create wealth.
However, a better opportunity went abegging in international markets: global tech giants which tanked in that crash have turned multibaggers ever since.
While Indian market’s best returns came from business behemoth Reliance Industries, which gained 140 per cent from its 52-week low hit on March 23, 2020, Elon Musk’s auto giant Tesla turned a multibagger, surging as much as 750 per cent in these four months.
Global mega-cap technology stocks Facebook, Amazon, Netflix, Microsoft, Apple and Google – together grouped as FANMAG — have all doubled investors’ wealth from their March lows, delivering up to 128 per cent returns.
Google and Microsoft have been laggards in the pack, gaining 57 per cent and 63.15 per cent, respectively.
On a year-to-date basis, these stocks have delivered up to 66.7 per cent return in the first seven months of 2020. Tesla swelled 232 per cent.
The combined market capitalisation of these companies stood at over $7.21 trillion, more than thrice BSE’s total market-cap of $2.4 trillion. FANMAG’s total market-cap now beats the market value of all companies ($5.67 trillion) listed on the Tokyo Stock Exchange.
Should you go for global investing?
After the eye-popping rally in the US stocks, domestic investors are exploring options to invest in global markets. Local brokerages and other service providers, too, are trying to ride this enthusiasm to build products and services for local investors.
Seasoned investors say direct investing in international markets is not easy for small investors.
Investors have two major options to take exposure to international equities. They can either invest directly in global stocks or can opt for international funds the through mutual funds route — like PPFAS Long Term Equity Fund or Motilal Oswal’s S&P 500 fund.
Investing in international stocks provides a wider choice, but there is a lot of risk associated with it, including fluctuation in the rupee-dollar rate, access to information and socio-political events.
Deepak Jasani, Head of Retail Research at HDFC Securities, said overseas equity investing is at a nascent stage for Indian investors. “Trading in international markets mostly attracts medium net-worth (MNIs) and HNI investors,” he said.
“One should not put money directly into international stocks, without proper research. It may end up in a bad outcome,” he said.
HDFC Securities tied up with Stockal and DriveWealth LLC in December to offer international equity trading. It now has over 30,000 clients availing this service.
Mutual funds are a more viable option for investors willing to build a flexible and diversified portfolio. However, they provide fewer choices and do not really generate super-normal returns.
“Investors shall keep their risk appetite in mind. Stocks are more volatile and risky. After the recent bull run, investors must keep their expectations low,” said Pratik Oswal, Head of Passive Funds at Motilal Oswal AMC.
“International funds are better alternatives for investors who have limited knowledge about overseas markets. They are simplified products. In international markets, passive funds perform slightly better than active funds at a lower cost,” Oswal said.
Options in the market
To attract domestic investors, many new entrants are offering low cost and easier investment options.
Ravi Kumar, Co-founder and CEO, Upstox (RKSV Securities), said his outfit plans to launch a global investing service, which will offer Indian investors access to over 60 exchanges across 25 countries in the world, including US, Singapore, UK and Japan.”
“One of the biggest advantages of global investing is portfolio diversification with exposure to the world’s biggest companies. We will also be offering the option of fractional investing, a facility to invest with limited capital,” he said.
Such products can give investors options to invest in overseas companies like Facebook, Apple, Google, Netflix and Amazon, which have become household names even though they do not belong to India.
Alankit, a domestic listed entity, provides an alternative way to invest in the US market with as little as $100, about Rs 7,500. The company has gained decent response from investors.
“This gives an opportunity to park money directly in global mammoths. Investing overseas can be more cost-effective with upright returns if done smartly,” said Ankit Agarwal, Managing Director, Alankit.
Other domestic brokerages, too, are looking at the global investing space aggressively, considering the demand from their high net worth clients.
“There is a large investor base willing to buy global giants of the new age. They see ample growth opportunities in the US markets. Investors want to hedge risk by investing across geographies. The rupee depreciation is also making such investment a lucrative proposition,” says Sandeep Manoharan, Director of Rupeeseed, a company that provides software solutions to brokerages.