MUMBAI (July 21): The record-shattering run in US technology stocks has captivated mom-and-pop investors across America. Now their counterparts in India are piling in too.
Spurred on by a spate of Indian brokerages offering new low-fee trading plans and the ability to buy fractional shares overseas, local amateur investors are snapping up names like Netflix Inc, Amazon.com Inc, and Facebook Inc. Vested Finance Inc, which helps Indians buy and sell offshore stocks and exchange-traded funds, said it received US$5 million in investor deposits in the June quarter, up 50% from the previous three-month period.
"The underlying focus for a lot of them is to invest in brands that they have been using, especially the technology brands listed in the US," said Viram Shah, the brokerage's chief executive officer.
Individual investors around the world have gravitated towards the stock market during pandemic lockdowns, driving a surge in new trading accounts. In India, the rush for US equities reflects demand for technology giants that have proven more resilient to the virus-induced turmoil that have engulfed the South Asian nation's financial companies. Robinhood-like trading apps have made it easier than ever for Indians to punt on overseas stocks within days of signing up.
While India's S&P BSE Sensex has rebounded more than 40% from its March low, the gauge remains in the red for the year. By comparison, the Nasdaq-100 has rallied over 25% in 2020 and reached a fresh record yesterday.
"Millennials have a lot of disposable income and they understand companies like Netflix or Google better than the Reliance or Tatas of the world," said Vinay Bharathwaj, co-founder and managing director at Stockal, another platform that allows individuals in emerging markets to invest in US equities.
India allows an individual to remit up to US$250,000 overseas, but the policy has been underutilised for investment purposes mainly due to the lack of convenient platforms for transactions. That is changing as new systems have made it easier to open accounts to trade abroad. At Vested Finance, it takes between two and four days to open an account, according to Shah.
The demand for US companies' shares is also tied to the familiarity of their products and services in India, said Apurva Patel, founder of Synergy Capital Partners, a Mumbai-based adviser to family offices and wealthy individuals.
"The urban consumer regularly uses products and services of about 80 companies in the S&P 500, which account for more than half the market cap of the index," Patel said. Indians are customers of about 30 companies in the Nasdaq 100, which make up more than 70% of the gauge's market value, he said.
The growing appetite for overseas stocks has also attracted some of India's biggest financial firms. HDFC Securities Ltd, a unit of the nation's largest private bank, tied up with Stockal and DriveWealth LLC in December to offer international equity trading. The service now has 30,000 clients with an average order size of US$9,000 for US-listed companies.
"In a digital world, physical boundaries and geographies don't matter," said Nandkishore Purohit, head of digital and distribution at HDFC Securities. "Given a choice, money will move from one asset class to another and from one geography to another in search of returns."