The erratic impact of the COVID-19 pandemic on different sections of society led to a rise in diverse trends across sectors. Teleconsultation for healthcare services, online shopping, and mobile banking, became hugely sought after. Interestingly, post pandemic-investment patterns also changed and benefited large groups of people. There continues to be a gradual increase in the number of new investors since 2020. If you’ve noticed, there has been an increasing curiosity and buzz regarding stocks, mutual funds, gold, and IPO investments, amongst youngsters. This is mainly due to many app-based trading platforms that are leveraging technology and content to remove investing roadblocks.
The shift in consumer behaviour, hybrid work cultures and focus on health have all intensified discretionary spending. The lockdown also provided us with more time to track investments. McKinsey’s Global Banking Annual Review states that over 70 per cent of their new customers are first-time investors, under 30 years. Young people are using their discretionary income to invest in equities, which is interesting because this means their focus is long-term returns and not immediate tax savings. The number of people trading on their own and exploring alternative asset classes has also gone up.
Vikram Limaye, Chief of National Stock Exchange (NSE), Delhi shared, “The NSE in Delhi, which helped transform the country's deep-rooted savings tradition into equity culture, has witnessed over 50 lakh new investor registrations in the current fiscal year.”
Locking up the disposable income for the foreseeable future is a thing of the past. As digitisation tightens its grip across industries, the move towards active online investing has become easier. A few clicks on the screen will now enable anyone to invest, trade, and have a holistic financial plan. Traditional investment ideas are being pushed to the side and contemporary digital avenues like alternative investment funds, mutual funds, crypto, and smallcases are being favoured. Financial institutions like neobanks are bridging the gap between services that traditional banks offer and the evolving expectations of customers.
Challenges of cross-border investment
Though young people are investing more, international investments are still not very easy. Cashing in on the foreign market poses its own set of obstacles. For cross border investments to flourish, the relationship between two countries, the country of nationality and country of investment need to be cordial. COVID-19 has impacted our exposure to global markets via online channels but the only aspect not globalized was investments. The monetary and fiscal policy of the country also plays a role in deciding the quantum of permissible inflow.
Since no country permits an FDI that might be harmful to domestic stakeholders or the economy, legal barriers also pose a challenge. In general, the flow of money from developed countries to developing countries as the product markets in developing countries are not saturated. This means it is crucial for developing nations like ours to protect resident shareholders’ interests. But, all this aside, allowing cross border investments has become essential to developing economies. Financial experts are stressing how Indians need to overcome the bias of their home country and diversify their portfolios by investing in foreign markets.
So why is it important for Indians to be able to access the international market?
India’s above average growth rate over the last 20 years is expected to continue. According to the International Monetary Fund, “the Indian economy contributes about 3.3 percent to the global Gross Domestic Product (GDP)”. And this can be attributed to the growth of Indian companies and corporate profitability.
The size of the US markets currently, and the number of companies with bigger market capital is a big advantage for international investors. If we take a look at what we use and access every day, be it Facebook, Microsoft, Samsung, Apple, Amazon, Netflix, etc, all of these giants are not listed in the Indian stock exchanges. The opportunities for creating wealth from international companies are out of reach for domestic investors. While organisations that are known worldwide are listed in the US stock exchanges, innovation-led sectors like AI, pharma, and electric vehicles, have a channel through which they are made accessible to investors in some countries.
To boost the returns of a portfolio, the best way is to allocate a portion to international equities.
Breaking down the borders of traditional investing
It made no sense why an everyday Indian investor couldn’t invest globally. This problem existed not just for India, but for most other developing countries. To have the choice to pick from a diverse market and invest as one pleases is important for traders all over the world. Exploring the vacuum in the market and understanding that only the super-rich had access to ways of investing in the global market led Vinay Bharathwaj and Sitashwa Srivastava to build a platform that enables investors in developing countries to take their wealth and portfolio global.
Prior to , Vinay and Sitashwa were running their own startups CarbonNavigator and Jade Magnet respectively. When they quit their ventures around the same time, the capital they had, helped them build and mould an investment tracking app called Stockal, focused on US-based retail investors. The platform helped people link their different investment portfolios and monitor them all in one place. When the duo was crafting the right product, they received multiple queries from Indian traders asking if they could invest in the US markets through their app. Back then, to trade internationally, an investor needed a US based trading account.
Sitashwa and Vinay’s goal of building cross-border bridges through Stockal was based on the idea that investing shouldn't be restricted to local market opportunities.
Pursuing that vision led to a seamless ecosystem for investors to make cross border investments. They brought Stockal to Indian audiences looking for international investing options in late 2019 and subsequently expanded to the Middle East in 2021.
Today, Stockal’s global investing platform powers some of the largest brokerage firms, wealth management companies, robo-advisors, and fintech platforms in India and the Middle East such as HDFC Securities, Centrum, Motilal Oswal, JM Financial, IIFL Securities, Scripbox and 80+ more banking and brokerage institutions. These serve over 1.5 lakh investors and 670mn transaction on a daily basis, helping them globalise their investments and savings.