In the last twelve years, US technology index – NASDAQ 100 has delivered 544% – almost double of Sensex (220%). Even better, if one would have invested from India, the investor would have earned a return of approx. 1,000% just because of dollar appreciation from INR 45 per dollar to INR 83 per dollar. Hence, international exposure to US stocks can not be avoided in the portfolio.
Here are the key benefits of investing in US markets (NASDAQ 100) from India:
1. Access to 100 of the largest non financial companies:
Following 10 companies by market capitalization have a weightage of 50% in NASDAQ 100:
2. Hedge against INR depreciation:
As evident from the chart below, an investor earned around 5X returns over Sensex in the last 12 years just by investing in ETFs of NASDAQ 100 from India.
3. Global exposure:
NASDAQ-100 Index comprises of companies with overseas business & generates the bulk of their revenue from different countries.
It comprises of large multinational companies with focus on disruption.
4. High-growth & innovative large cap companies
NASDAQ-100 companies on an average spend 3.5x more than S&P 500 index companies for R&D. 62 companies in NASDAQ 100 in near past have filed patents across 34 key areas of disruptive technology.
5. Exposure to “new economy” sectors
NASDAQ 100 is market capitalization weighted index comprised of 100 most innovative and rapidly expanding non-financial Companies. US economy growth is shifting from capital intensive, traditional industries to the new economic sectors such as healthcare, technology and consumer. Last 10 years sales growth across industry in US large and Midcaps can be seen in Real Estate, healthcare and technology.
6. Sector and geographical diversification
However, there are certain points one should consider before investing in the US markets:
Volatility: US markets are more volatile than Indian markets;
Taxes: W.e.f. 01/04/2023, Indian government will tax foreign funds, foreign ETFs and foreign stocks at per the slab rate of investors (without the lower tax of 10% as applicable for Indian equities);
Currency exchange rates can be unfavorable at times;
Higher interest rates may affect the growth of companies listed in US which may be evident in lower stock returns.
Since these companies generate most of their revenues across the world, a recession may affect the stock returns in near term.
However, for the long run, we remain bullish on companies listed on NASDAQ 100. An investor with aggressive risk appetite or suitable investment objective (foreign children education or world tour etc.) may consider investing in the US markets. For more information, kindly connect with your respective relationship manager.
