COVID-19 has shattered every sector over the globe. Whether it is Industrial, Healthcare, or Banking and Finance, each sector is facing enormous challenges.
Whatever may be the condition, smart people will always find a way to stay in the market. Usually, Indian Investors always invest in the Indian market, even though we are permitted to invest in foreign equities for the last 15 years.
The Biggest reason behind this is that India is one of the fastest-growing economies in the world. So, the majority prefer investing in developing countries rather than the market of developed countries.
However, today I have penned down the possible benefits that an investor may receive while investing in the foreign or international market.
Below listed are the largest stock exchanges market over the globe.
- New York Stock Exchange
- BSE Limited
- National Stock Exchange India
- Hong Kong Exchanges and Clearing
- Japan Exchange Group
- Shenzhen Stock Exchange
- Shanghai Stock Exchange
Major Benefits of Investing in a Foreign Stock Market
Diversification generally refers to investing across various industries and different MCAP’s. When you invest in foreign markets, you can receive the same benefits of diversification, even if you include the company already existing in the same industry or MCAP.
Market Rebound Rate
I earlier mentioned that the Indian Investors prefer to invest in the Indian market rather than foreign markets as they provide a better growth rate. While market around the world undergoes crisis at the same time. This crisis has happened twice post 2000.
The recession of 2008 was the time of the big recession, where the economy around the globe got stagnant. This recession has first hit the US market, but it has also crashed the Indian market badly. The Indian market suffered a crash of 55% compared to the height it touched at the end of 2007. Furthermore, after this recession, the Indian market rebound and Indian market gained only 4.3% from December 2007 to December 2013.
While the USA market has also crashed by 50%, but it provided a 50% return after rebounding within the same timeline.
Now we all facing COVID-19, and market everywhere is crashed severely. But if you are noticing the USA market has crashed by 30% in March, i.e., from February to March. However, it has already started to rebounding and has touched new heights gaining 15% returns. In comparison, the Indian market suffered a fall of 35% and have still not previous levels.
Another advantage of investing in foreign markets is the exposure an investor will receive in terms of security. Earlier, an ideal opportunity to the mid-2000s and observe the alternatives accessible to Indian investors regarding innovation or technology-driven securities. They are restricted to TCS, Infosys, and Wipro.
Then again, foreign business sectors gave any semblance of Apple. Microsoft, Google. On occasion, even lawful wards bar from specific organizations to work in a nation. Speculators, in any case, have the alternative just to put resources into outside nations.
However, every coin has two sides. There are a few risks as well, but when you invest in foreign stocks, you must analyze all the positive and negative perspectives. The existence of risks does not mean that investors should be blindfolded, but should assess the market properly before taking any decision.