When it comes to reducing the overall level of risk in an investment portfolio, diversification is essential. In today’s globally interconnected economy, spreading one’s assets across a variety of nations is just as crucial and necessary as extending one’s holdings throughout a range of asset types. When India liberalised its market, its citizens got access to international products and services as well as foreign investment.
However, investing in a global market like the US stock market is different from investing in a domestic market like the Indian stock market. Putting money into the US stock market might be nerve-wracking, but it can also pay off handsomely.
This article provides an in-depth comparison of the US stock market and the Indian stock market, highlighting the critical distinctions between the two.
Difference between the Indian stock market and the US stock market
The US stock market features the US and global corporations. Companies from all around the globe may be found among the ranks of the key indexes of the US stock market. A nationwide catastrophe might cause the index to drop. The change, though, would be marginal at most. In contrast, the majority of Indian stock market indexes are dominated by domestic Indian enterprises. A sharp drop in the indexes is possible with even moderate disturbance in the nation. Because of its size and depth of resources, the US stock market can weather any storm. One cannot make the same statement about the Indian market.
In the Indian market, the Indian Rupee (INR) is the currency used for all types of investments. When making an investment in the US market, dollars are used. Even though it is not formally recognised as such, the United States dollar has become the most widely used currency in the world.
Since the value of the rupee has been falling against the dollar over time, it makes sense to invest in dollars to get a larger return. If the dollar continues to rise in value, the portfolio’s value and the value of its assets will both rise. Therefore, the return on investment for a dollar investment will be greater than the return on investment for an Indian rupee investment.
Stock market volatility in the United States is lower than in India over the long run. The Indian markets have been subject to greater fluctuations. Consequently, investing in a variety of countries throughout the world is an effective method of diversification. Additionally, investors that invest abroad might anticipate a distinct movement for their portfolios compared to the movement of the Indian market.
4. Global Factors
There are a substantial number of small and medium-sized businesses available for investment in the Indian stock market. A company in India must be profitable for three years before it can go public. Indian financiers are thus excluded from the country’s home-grown businesses.
However, you can buy shares in major international companies like Amazon, Flipkart, Facebook, etc., in the US stock market. Such international firms will cause your portfolio to change and adapt to market conditions. As a result, investors have a better chance of making money in the US market since their money has greater worldwide exposure and can be put to use in a number of the world’s leading companies.
In-depth research is essential before investing across multiple geographic areas. Since each economic system is unique and subject to external influences, market conditions can fluctuate. In light of this, it can be taxing and overwhelming for an investor to monitor multiple markets at once.
When compared to the US stock market, the Indian market has a minor edge in terms of research. Some investors may be willing to set aside the possibility of larger returns in exchange for the convenience of stock options on India’s stock market because of the time and effort required to investigate the US stock market.
The two do not even come close to being comparable to one another in terms of their sizes. Comparatively, the Indian stock market accounts for only 2.97 per cent of global market capitalisation, whereas the US market accounts for 43.2 per cent. This should not come as a surprise, taking into account the sizes of the US and Indian markets.
In conclusion, the US Stock Market and the Indian Stock Market both have their unique set of benefits and drawbacks. Having access to overseas markets, on the other hand, will help enhance investment returns in the contemporary context of investment. When compared to the Indian market, the US market possesses greater diversity and exhibits lower levels of volatility. Once you have made your mind to invest, start your journey by opening a Demat account in Angel One!