As investors, we pay more attention to Foreign Investments that flow into our country and tend to turn a blind eye to India’s investments across borders.
Risk of concentration
Over the years, research proves that Indians invest nearly 100% of their corpus within India, this is in comparison to 56% by UK investors. [1] This geographically concentrated investment strategy restricts a portfolio’s diversification and puts investments at country-specific risk; in such portfolios volatility in the Indian market will tend to cause major fluctuations to investor returns. MSCI India Index measured Indian market volatility over the past 5 years as 13.7% and offered returns of approximately 7.7%, while during the same period, the MSCI World Index volatility measured 10.7% and offered returns of approximate 12%.[2]
Considering the current statistics of global investments, it is becoming clearer that investors are keen on diversifying their portfolios by adding global investments to their basket.
“The declining value of the rupee and rising dollar value have also pushed more Indians to put their money into US markets.”
- Vinay Bharathwaj, Co-Founder & Co-CEO, Stockal Inc
Indian overseas investments of 2020:
● In 2019-20, India invested in 120 projects and created 5,429 new jobs in the UK to become the second-largest source of FDI for the UK. [3]
- Foreign Portfolio Investors (FPIs) made a total net outflow of approximately Rs. 1 lakh crore, which roughly translates to US$ 14 billion. [4]
- Axis Securities launched a new platform to invest in US stocks to meet the increasing interest of the Indian retail investors in the US stock markets.
- Various other online investment platforms too launched their global investing services. [5]
- Witnessing this rush for global investments by Indian investors SEBI announced its expansion of foreign investment cap for mutual funds; raising it from US$ 300 million to US$ 600 million.
Clearly, institutional investors are seeing the benefit of investing in global markets despite the Bull Run in the current market. And, retail investors are following suit. Could one attribute this move to the process of informed decision-making, where investors today have recognized the absolute need for global diversification in their portfolios to hedge against the risks of putting all their investments in a single geographical basket?
Scaling up
Retail investors today have been spoilt for choice with online trading platforms and investing to broker ARN transfer platforms offering them seamless avenues to global investing opportunities. They are lured by benefits of zero commission, low initial investments, curated basket of stocks and ETFs as well as ease in money transfers. Beyond Robo-advisory and direct investment platforms, financial advisors will now have to compete with these offerings too. Are individual financial advisors technologically equipped with the new LRS investment for IFA in India, IFA back office system and other cutting-edge software, and competently skilled to offer their investors global opportunities to benefit from?
Overcome the home bias
Wealth managers must scale up their capabilities by upgrading to the best wealth management software and advanced platforms that equip them with the latest tech-driven processes, to enhance their capabilities. Fintso offers financial advisors that much-needed support system to use deep-tech to increase efficiencies in their operations. Fintso additionally offers advisors the benefit of a multi-product suite, and actionable insights, designed to meet every investor’s specific goals be it global or domestic investments. Advisors who once steered clear of cross-border investments due to its complexities, need not shy away from offering global opportunities to their investors with Fintso as their partners.
With Fintso you get:
- A unified platform to offer clients access to both domestic and global stock markets
- Easy digital KYC process to open client’s brokerage accounts in the US
- Investment in tranches and remittance through existing accounts
- Access to marquee stocks, thematic baskets of stocks & ETFs
- Consolidated one-click view of domestic & global investments
Fintso also uses Machine Learning to provide advisors with tactical calls looking at the market scenario and the status of their portfolios giving them the power to make informed decisions.