How Are Indian Markets And US Markets Related?
Given how linked our world is, even a little imbalance in one nation negatively affects the others. This may result from bilateral commerce or international investments between these nations. Even the financial markets are connected, if not directly.
Klemens Wenzel Metternich, a well-known diplomat from France, famously said: “When the US sneezes, the whole world develops a cold.” As the USA’s economy grew to be the greatest in the world, with a GDP close to $23 trillion, this adage has become increasingly more pertinent over time. Simply put, this adage suggests that whatever occurs in the US also impacts elsewhere in the world. In this regard, the global financial crisis serves as an example and further demonstrates the impact of the US market on the Indian market.
Difference Between US Stock Markets And Indian Markets
- Currency: The Indian Rupee (INR) is the currency accepted for all investments in the Indian market. Dollars are utilized while investing in the US stock market. The United States dollar has overtaken other currencies as the most commonly used worldwide, although not legally recognized as such. It makes sense to invest in dollars to earn a higher return since the rupee’s value has declined over the dollar over time. The value of the portfolio and the value of its assets will both increase if the value of the dollar keeps rising. As a result, an investment made in dollars will provide a higher return than one made in Indian rupees.
- Diversification: US and international firms are represented on the US stock market. The major US stock market indices include companies from all around the world in their rankings. The index might decline in the event of a national tragedy. In contrast, domestic Indian businesses predominate in the bulk of Indian stock market indices. Even a tiny amount of unrest throughout the country might cause a significant dip in the index. The US stock market can withstand any storm because of its size and depth of resources. Regarding the Indian market, the same assertion cannot be made.
- Global Variables: Consequently, investors tend to have a higher chance of profiting in the US market since their funds have more global exposure and may be used in many of the top corporations throughout the globe.
- Volatility: The Indian markets have seen more turbulence. Therefore, investing in a range of nations throughout the globe is a successful way to diversify. Furthermore, foreign investors may expect a different movement for their portfolios than the Indian market.
- Size: The two are so vastly different in size from one another that they cannot even somewhat be compared. Comparatively, the US stock market accounts for 59.9% of worldwide market capitalization as of Jan 2022, compared to the Indian stock market’s 2.97% share. This should not be shocking, considering the magnitude of the US and Indian markets.
- Research: Before making investments across several geographies, thorough research is necessary. Market circumstances may change since every economic system is distinct and open to outside influences. Given this, it may be difficult and stressful for an investor to keep an eye on many markets at once. The Indian stock market has a slight advantage over the US market in the research. Due to the time and effort needed to research the US stock market, some investors may be ready to forgo the chance of higher profits in favor of the ease of stock options on the Indian stock market.
Reasons To Invest In US Stock Market
Many people are curious about how to buy US stocks from India. Others wonder if investing simultaneously in India or the US markets would be wiser. However, there are a few considerations to make regardless of whether you decide to invest in Indian markets or foreign equities and funds.
- Protect Yourself From The Rising Dollar: By buying US stocks from India, you may shield your money from the rising US dollar, which has increased by 5% annually on average. This way, you can ensure your money is not eroded even if the rupee decreases.
- Construct A Nest Egg: If you ever want to reside in the United States, have relatives there, or want to send your children there to study, investing in US stocks and funds might be beneficial. This is because you engage in a developed economy and earn interest in dollars.
- Geographical Expansion: The US has a GDP ten times larger than India’s, and most global market capitalization comprises US-listed corporations. You may build a well-rounded portfolio, thereby diversifying your holdings.
- Invest In Well-Known Corporations: US-based firms such as Netflix, Tesla, Apple, Nike, etc., are brands you trust and comprehend. As a result, you can contribute in some small way to their development.
- Historical Results: In the past, the US stock market has done better than the Indian stock market. Based on that alone, many find investing in the US stock market more enticing. The US and Indian markets have produced comparable returns for their investors over the last 10 years. In the last 10 years, the DJI has achieved a compounded annual return of 9.75%, while the Sensex has created a return of 9.70%. The returns in the first five years of the decade (2011-15) were similar, with the US markets expanding at a compounded annual rate of 12.86% and the Indian markets growing at a compounded annual rate of 12.11%. In six of the last ten years, the Dow Jones index outperformed the BSE Sensex in annual performance.
How To Invest In The US Stock Market?
You may use many methods to start your foreign investment if you’re wondering how to invest in the US stock Market. You may choose one of them outright or mix many of them. Don’t forget about geography while making decisions.
- Direct Investment: Investments in US stock markets may be made through digital platforms like Stockal. Most Indian brokerages today provide access to the main overseas markets, so you might also try them. Furthermore, you may open an account with overseas brokers that help Indian traders.
- Invest In Foreign Securities: Equity funds that are owned and managed by foreign experts to invest in assets in their native countries are referred to as “international funds.” Although there are RBI constraints to be aware of, this may be an additional chance to reach global markets while getting professional assistance.
- Invest In index Funds Or ETFs: One of the indirect methods of investing in the US stock market is via exchange-traded funds, or ETFs, which invest in overseas funds. A specific kind of ETF called an index fund has a portfolio built to mimic or track the components of a financial market index, such as the S&P 500. These funds continue to invest in their benchmark index, notwithstanding market conditions.
“Never put money into a company you don’t fully comprehend.” An oft-repeated Warren Buffet phrase that, perhaps, now that Indian investors are warming up to investing prospects outside the country—the USA, in particular—takes on new meanings. Instead of avoiding the market in favor of only local chances, the wise investor would now prefer to comprehend the US market and start his investing adventure there. After all, it is often recommended that investors geographically diversify their assets by making purchases in domestic and foreign markets.
Yes, the US and Indian markets both have benefits. But it’s simple to understand how US markets offer more significant potential in a contemporary investment environment with access to the global market. This is partly because the dollar is the reserve currency, and the United States has a robust and mature capital market, which draws capital and firms, as well as the fact that some of the most promising businesses in the world are based there.
If you’re unsure how to invest in the US stock market, open an account with Stockal, which provides a SIMPLE, SMART, and SECURE investing and trading platform. Stockal, excellent for the US stock market from India, provides SIPC protection of up to $5,000,000. Choose an experienced companion to accompany you on your quest to invest in the US stock market. Visit Stockal’s website for additional details on how to invest in the US stock Market.