Appreciate, a SEBI and IFSCA registered fintech company, has launched a report titled ‘From Dalal Street to Wall Street’, which sheds light on the changing dynamics of Indian financial markets and their increasing integration with global investments.
As Indian financial markets mature, the report highlighted a significant trend: an increasing number of Indian investors are venturing beyond their national borders, diversifying their portfolios with US stocks.
This change reflects a growing awareness of the benefits of global diversification.
Yogesh Kansal, Co-Founder and Chief Marketing Officer of Appreciate, highlighted this trend in the report: “Diversification is no longer just a buzzword; it is a necessity in today’s interconnected world. By allocating a portion of their portfolios to US stocks, Indian companies are investing in diversified portfolios to boost their business growth.” investors “They can better navigate domestic economic crises and take advantage of growth opportunities in one of the world’s most robust markets.”
Key points of the report
Investment overview: The report highlighted that investing in US markets from India is now more accessible than ever.
The Liberalised Remittance Scheme (LRS) allows Indian residents to remit up to $250,000 per financial year for various purposes, including investments in foreign shares.
Benefits of diversification: The report details how globally diversified portfolios, especially with US stocks, have historically outperformed during economic crises in India.
For example, during demonetization in 2016 and the COVID-19 pandemic in 2020, diversified portfolios protected investors from severe losses.
Historical performance: The report presented a comparison of the S&P 500’s performance from 2009 to 2019, showing that while the index experienced an 8% drop, it also grew by 119 points, or 5.7%, demonstrating the resilience of the US market.
Rupee depreciation: The report highlighted the significant depreciation of the Indian rupee against the US dollar between 2010 and 2020.
US Market Potential: The US stock market, with a market capitalisation of $50.8 trillion, presents immense opportunities for Indian investors.
Some of the largest US companies have market capitalisations that exceed the GDP of major economies such as France and the UK.
Growth of the AI sector: Nvidia’s emergence as a leader in the AI space, reaching a market valuation of $3.34 trillion, exemplifies the potential for high growth in specific sectors in the United States.
Outgoing remittances: Outbound remittances from India reached a record high of $31.73 billion in FY24, growing 16.91% year-on-year.
Fiscal outlook: The report provided a comprehensive overview of taxation of foreign investments for Indian investors.
Income from foreign investments, including capital gains and dividends, is subject to tax in India, but investors can claim a tax credit for US taxes paid under the Double Taxation Avoidance Agreement (DTAA).
Challenges and opportunities: While global diversification offers numerous benefits, the report also highlights challenges such as currency volatility and tax implications.
However, high growth potential, currency appreciation and stable markets make US investments an attractive proposition.
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