Small and Midcap portfolio that are likely to show growth momentum
The economies of India and the US are quite different. India is a developing economy, while the US is a developed one. This means that the stock markets of the two countries also have some major differences.
This includes not just the differences in terms of the listed companies but also in regulation, volatility, valuation, size, and more. In fact, something as basic as the currency of exchange differs. Moreover, the Indian and the US stock markets are influenced by different factors, and they react differently to the various global events. Thus, you cannot employ the same investing strategies in the US as you would in India.
So, if you are planning to invest in stocks in the US, it becomes important to compare the Indian stock market with the US stock market. This will help you understand the pros and cons of investing in each of these markets and also give you a better idea about where to invest.
To understand this in greater detail, let us look at the differences between the Indian and US stock markets.
Basis | US stock investing | Indian stock investing |
---|---|---|
Market volatility |
The US stock market is less volatile in terms of long term investments. |
The Indian stock market is considered to be comparatively more volatile. |
Size and valuation |
The US market is much larger in terms of both size and valuation. It is the largest stock market in the world with a market cap of $47.32 trillion |
The Indian stock market is ranked 5th in the world in terms of market capitalisation, which is $3.21 trillion. |
Currency of exchange |
The buying and selling is done in terms of the US Dollars. |
The Indian Rupee (INR) is the currency used. |
Regulation |
The US stock market is regulated by the US Securities and Exchange Commission (SEC). |
The Securities and Exchange Board of India (SEBI) is the regulator of the Indian stock market. |
Research requirement |
Extensive research is required because of the large number of listed companies. |
Research is more crucial as well as time consuming as not all information is easily available. |
Top performing sectors |
Stable sectors such as healthcare and technology are top performers. |
Sectors linked with economic growth, such as power, are the top performers. |
Global exposure |
There is higher global exposure because of various MNCs listed on the US exchanges. |
There is less global exposure as the Indian exchanges comprise mainly the domestic companies. |
Portfolio diversification |
There are a lot more avenues for investing because of the larger size of the US stock market. |
The scope for diversification is less when compared to the US stock market. |
Investment strategies |
Focus should be on investing in companies with a good track record. You can also invest in new companies and capitalise on new ideas. |
Focus should be on proper research before investing. Investment should be done in well-established companies. |
Return on investment |
Historically, the average annual return on investment has been approximately 10%. |
The average annual return on investment has been around 15%, which is higher than the US stock market. |
Listing requirements |
More stricter listing requirements and a higher listing fee is charged. |
Listing is more time consuming, as a company must be at least 3 years old before it can get listed. |
Above mentioned are the major differences that must be noted before any investor ventures into the US stock market from India.
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