2021 was quite the year for Wall Street. Despite constant Covid and inflation-related headwinds, the S&P 500 clocked more than 25 per cent returns in the year. To add to it, 2021 not only saw the highest IPO volumes on Wall Street since 2000, but also saw huge retail trading volumes during the Gamestop and AMC meme stock rallies.
Amid the volatility and uncertainty over the year, Indian investors continued to venture into the US markets in their quest to become global investors. And why are Indians investing internationally? According to a survey we ran among Vested users, 35 per cent of Indians invest in the US markets to diversify geographically, 25 per cent are saving up for future events like education and travel and 45 per cent are looking to invest in specific US-listed companies.
Next, let’s look at some observations on Indian investors’ US investing behavior in 2021.
First up is the meme stock mayhem in January 2021 that captivated retail investors across the world, including investors from India. Led by the increased proliferation of zero-brokerage apps and social investing platforms like Reddit, retail investors piled into meme companies like Gamestop (GME) and AMC Entertainment Holdings (AMC) and pushed their prices through the roof. The high trading volumes choked the entire US brokerage infrastructure and led to brokers halting trades in certain tickers as the regulators required them to deposit funds overnight. Retail Indian investors also participated in this retail frenzy.
GME and AMC were the top stocks on the Vested platform for almost four weeks. As the year progressed, the interest in these companies waned and investors sold their stocks. Both GME and AMC are now part of the top 10 most sold stocks on Vested for 2021.
Second is the specific interest in IPOs that investors from India showed. 399 IPOs raised $142.5 billion in the busiest year by deal count since 2000 and the biggest year for proceeds ever. SPAC activity also exploded with a total of 610 deals happening in the year. Top IPOs that caught the Indian investor’s attention included Coinbase, Freshworks, Robinhood and Didi. Coinbase is held by 1.3 per cent of Vested customers, making it one of the top holdings of Vested users. On the other hand, Freshworks and Robinhood are held by 0.7 per cent and 0.3 per cent of users, respectively. Didi, China’s Uber, had a strong debut on the US markets and with Indian investors, but ran into issues because of regulatory concerns and now is in the process of being delisted from the US exchanges.
Third is the unabating love for Tesla among global Indian investors. For a second year in a row, Tesla continues to be the Indian investor’s favorite company. It was the most bought and sold stock on the Vested platform for 2021. Even though the electric car manufacturer does not have a presence in India yet, investors seem to be obsessed with Elon Musk’s company. As of latest data, Tesla is held by 6.9 per cent of Vested investors.
Lastly, overall stock popularity data suggests that the technology sector continues to be the popular choice for investments in the US market. ETFs like VGT, ARKG and ARKK all appeared in the top 10 ETFs purchased by Indian investors in the US markets. All of these ETFs provide exposure to either established technology companies or emerging technology companies in the US. Further, all of the top 10 stocks bought on the Vested platform are technology stocks. Apart from the usual suspects such as Apple, Microsoft and Amazon, companies like Shopify, Square and Salesforce are popular among the Indian investor base.
While 2021 was a strong year for Wall Street, 2022 is going to be tricky. Inflation is accelerating everywhere and supply-chain disruptions that contributed to rising consumer prices aren’t fixed. The Federal Reserve’s three projected interest rate hikes in 2022 will be on top of investors’ minds, threatening to drive up bond yields and give competition to risky assets like stocks. Valuations also provide little room for risks. However, for long-term retail investors, both domestic and international equities will continue being a key part of their asset allocation. Further, pockets of opportunities will continue to emerge throughout the year that investors can capitalise on.
The author, Viram Shah, is Co-Founder and CEO of Vested Finance. Views are his own.)
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