Beyond Dalal Street: Why Indian Investors Are Looking At Global Markets

For decades, the Indian investor's portfolio largely revolved around domestic stocks, mutual funds, fixed deposits and gold. While these continue to be important investment avenues, the investment landscape is changing. Technology and new financial platforms are making it easier for Indians to explore opportunities beyond domestic markets.

From investing in global technology companies to accessing international exchange traded funds (ETFs), investors today have more choices than ever before. The growth of GIFT City as an international financial services hub is adding another dimension to this shift.

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But does having access to global markets automatically make an investor's portfolio better diversified? Not necessarily.

Speaking on the Simple Hai! podcast with Vivek Law, Mustafa Pardiwala, Chief Business Officer, Mirae Asset Capital Markets (IFSC), discussed how global investing, technology and changing investor behaviour are reshaping the financial landscape.

Why should Indian investors look beyond domestic markets?

India offers significant investment opportunities, but it represents only a fraction of the global equity market. This means investors who restrict their portfolios to domestic markets may miss opportunities in businesses and industries that have a stronger presence overseas.

Consider sectors such as semiconductors, artificial intelligence, robotics, cybersecurity and data centres. Several companies leading developments in these areas are listed in international markets, particularly in the US.

Global investing gives Indian investors an opportunity to participate in the growth of such businesses. It can also help diversify portfolios across geographies, industries and currencies.

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However, investing in an international company simply because it is popular or has delivered strong returns is not a sound strategy. Investors need to evaluate the company's fundamentals, valuation, business model and long-term prospects just as they would with a domestic investment.

Is GIFT City making global investing easier?

GIFT City, Gujarat, is emerging as an important centre for international financial services. Its International Financial Services Centre (IFSC) operates under the regulatory framework of the International Financial Services Centres Authority (IFSCA).

For eligible resident Indians, overseas investments can be made through permitted routes under the Reserve Bank of India's Liberalised Remittance Scheme (LRS). The scheme allows individuals to remit up to $250,000 in a financial year, subject to applicable conditions and regulations.

Depending on the platform and investment structure, investors can access international stocks, ETFs and other permitted financial products.

Another development is fractional investing. Instead of purchasing an entire share of an expensive company, investors may be able to buy a fraction of it. This can lower the initial investment required to access certain global stocks.

However, a lower entry amount does not mean lower risk. Investors must understand the product structure, transaction costs, currency conversion charges, taxation and applicable regulatory requirements before investing.

The currency risk investors should understand

Global investing also introduces an important factor that domestic investors may not always consider: currency risk.

When an Indian investor purchases a dollar denominated asset, the eventual return in rupees depends on two factors: how the investment performs and how the rupee moves against the dollar.

A weakening rupee can increase the rupee value of an overseas investment when converted back into Indian currency. However, currency movements can also work against investors. Even if an international investment performs well in its local currency, unfavourable exchange rate movements can reduce the final return in rupee terms.

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Therefore, currency exposure should be considered while deciding how much of a portfolio should be allocated to international investments.

Investors have more information, but are they making better decisions?

While investment opportunities have expanded, investor behaviour remains a concern.

Pardiwala highlighted how the constant flow of financial information, social media commentary and stock market tips can influence investment decisions. Investors today have access to more information than ever before, but distinguishing useful insights from market noise has become increasingly difficult.

This can lead to impulsive decisions, frequent portfolio changes and an excessive focus on short-term returns.

The problem is particularly relevant in derivatives trading, where leverage and market volatility can magnify losses. Investors who enter these products without understanding their mechanics and risks may expose themselves to substantial financial setbacks.

The same lack of patience can affect long-term investments. Stopping systematic investment plans (SIPs) during market corrections or frequently switching funds based on short-term performance can disrupt the discipline required for wealth creation.

More investment choices, greater responsibility

The expansion of global investing is an important development for Indian investors. It offers access to businesses, sectors and markets that may not be adequately represented in domestic portfolios.

But global investing should not become another trend that investors follow without understanding.

Before investing overseas, individuals should assess their financial goals, investment horizon, risk appetite and existing asset allocation. They should also understand the costs, tax implications, regulatory framework and currency exposure associated with the investment.

The future of investing may be increasingly global, but the fundamentals of building wealth remain unchanged. Investors need to make informed decisions, diversify sensibly and stay disciplined through market cycles.

Having the world at your fingertips is an opportunity. Knowing how to invest in it is what matters.

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