Major Indian online investment platforms are opening up access to US stocks for millions of retail investors seeking to diversify into global assets as Indian markets continue to underperform.
Groww, which accounts for more than 29% of India’s 46 million active investors across stock brokerages, rolled out US equity trading earlier this month. The platform offers access to more than 10,000 US stocks and exchange-traded funds (ETFs), along with fractional share ownership, chief operating officer and co-founder Harsh Jain told CNBC.
Nvidia, SpaceX, Apple, Alphabet, Amazon, Micron and Meta are among the most popular companies with early users, Jain said.
Zerodha, India’s second-largest trading platform with a 15% share of active clients, has started beta testing access to US stocks and plans to launch the feature in a few weeks, the company told CNBC. Angel One, which has 6.7 million active retail clients, is also reportedly planning to introduce US stock trading.
“There has always been latent demand in India for investing in global companies,” Somnath Mukherjee, vice president of corporate development at Zerodha, told CNBC.
Why are Indian investors looking at US stocks?
The underperformance of Indian markets, the absence of major domestic artificial intelligence companies and the depreciation of the rupee against the dollar are driving interest in overseas investments, Mukherjee said.
India’s benchmark Nifty 50 has fallen nearly 13% since the beginning of the year, while the S&P 500 has gained more than 12%. Foreign investors have withdrawn a record $32.5 billion from direct equities since January, according to data from Indian depository NSDL.
“There is a ‘big interest’ among Indians to invest in US stocks, especially in tech companies,” Nitin Jain, chief executive and director at Kotak Mahindra Asset Management Singapore, told CNBC.
He added that “retail investors like whatever goes up,” pointing to the frenzy among Indian investors for cryptocurrencies a few years ago.
What are the risks and rewards?
Investing overseas offers Indians exposure to global companies and another currency. Mukherjee said the rupee’s depreciation was prompting investors “to keep a part of their portfolio in another currency.”
However, rising overseas investments could add to currency pressures when the rupee is weak and US markets are performing strongly.
“The worry is that they rise exactly when the rupee is weak, and US markets look strong, and thereby ‘amplify pressure at the worst moment’,” Tanvi Kanchan, associate director and head of international business and strategy at Anand Rathi Shares & Stock Brokers, said.
Resident Indians sent more than $321 million overseas for equity and debt investments in August, up 111% from a year earlier. Investment accounted for 11.7% of total outward remittances, compared with 5.8% a year ago.
As participation grows, Kotak’s Jain cautioned, Indian regulators could have “second thoughts” about allowing retail investors access to US markets.
