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FOLLOWING THE HERD

Indian investors are rushing to add shares of American companies to their portfolios

Indian investors-US stock markets-Tech companies
REUTERS/Brendan McDermid/File Photo
The new trading floor.
  • Prathamesh Mulye
By Prathamesh Mulye

Writer, banking and economy

Published

US tech stocks—with their mouth-watering returns since March—have giving Indians such a FOMO that investors from the country are now flocking to shares of companies like Apple and Amazon through any route available.

The prime reason for the spike of interest in US tech stocks is the manner in which they emerged as clear winners during a global economic downturn. The profits of these firms surged when most industries across the world were struggling to stay afloat. In August, Apple became the most valuable publicly traded company in the world, and e-commerce giant Amazon’s shares continue to soar as the coronavirus pandemic has given a push to online shopping.

Amazon and Apple were the second and third most searched stocks on the internet by Indians, according to an analysis by online investment platform Invezz.com.

Parag Parikh Long Term Equity Fund

In July, Indian investors, who had heavy exposure to the domestic stock markets, learnt the importance of not putting all their eggs in one basket. Meanwhile, one mutual fund became the talk of the town because of its contra-performance.

Parag Parikh Long Term Equity Fund, which invests around 35% of its assets in international stock markets, gave a one-year return of 17.5% in July. In comparison, other funds in the multi-cap funds’ category with exposure to just Indian equities, delivered only 0.56% return on average. Parag Parikh fund’s top two investments were Amazon (8.83%) and Alphabet (7.91%), which was the reason for its extraordinary returns.

“Our exposure to overseas markets has helped us to diversify and provide reasonable returns along with our Indian equity portion,” said Ranuak Onkar, who manages international investment in the scheme at Parag Parikh Financial Advisory Services.

It is no surprise now that more brokerages and mutual funds are looking to tap into the global markets. In fact, even the Indian regulators have taken note of this and have increased the cap for investing in overseas markets.

Investing in international stocks

Indian mutual fund houses are launching new schemes with a focus on global companies.

“We think Indian investors have matured and are open to new ideas which can help their long term investment objectives,” said Ashwin Patni, head of products and alternatives at Mumbai-based Axis Asset Management Company, which launched Axis Global Equity Alpha fund in September. This fund will invest in a UK-based investment manager Schroder International Selection Fund Global Equity Alpha, which holds stakes in global companies like Amazon, Alphabet and Microsoft Corp. Axis global fund has attracted around Rs1,200 crore ($160 million) since its inception.

Another major mutual fund house Motilal Oswal AMC launched the Motilal Oswal S&P 500 Index Fund in April in a bid to offer the option of diversification for its investors. “The fund is now close to Rs500 crore—better than what we anticipated,” said Pratik Oswal, head of passive funds at Motilal Oswal AMC.

Brokerages that provide a direct route to buying shares of international companies are also witnessing heavy traction.

In the last three months, investments platform Vested Finance witnessed a spike of 300% to $40 million in terms of investments in the US markets by Indians. New account openings also climbed up by 70% quarter-on-quarter to 30,000 in the same period.

Viram Shah, co-Founder and CEO of Vested Finance asserts that this trend will continue. “As the awareness about investing in overseas markets increases, more people will flock toward this asset class to diversify their portfolios,” said Shah. For this, he is banking on millennials and non-resident Indians, which is “the key segments of investors that joined the platform.”

While the concept is gaining popularity now, Indian mutual fund houses have been offering these services to retail investors for a long time now. As of September, the asset under management of Indian mutual fund schemes, which invest in international companies, stands at Rs9,693 crore, according to ValueResearch.

And with the US markets continuing to hit fresh highs, the corpus is likely to increase in the future.

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