Indian Investors Seek Higher Returns Overseas as Domestic Market Lags

Indian retail investors are actively looking beyond domestic markets for higher investment returns, with a notable increase in capital flowing into equity markets in the United States, Europe, China, and Brazil. This trend is largely attributed to the underwhelming performance of Indian markets, which have yielded approximately 4.7% in the last 12 months, compared to significantly higher returns in global counterparts like the US S&P 500 (12.51%), China's CSI 300 (12.98%), Brazil's IBOVESPA (18.24%), and Germany's DAX (22.58%).

The accessibility of overseas investing has been greatly enhanced by 'do-it-yourself' or DIY platforms such as Vested Finance, Borderless, and Appreciate Wealth. These platforms, leveraging the Reserve Bank of India's Liberalized Remittance Scheme (LRS), allow resident Indians to easily send up to $250,000 abroad annually for investment purposes. This has led to substantial growth for these brokers; for instance, Appreciate Wealth saw a 44% increase in overseas trade volume and a 164% surge in value in October year-on-year, while Borderless reported its monthly trading volumes more than doubling.

RBI data confirms this shift, showing a 21% year-on-year rise in overseas equity and debt investments under LRS as of August. This trend is also influenced by the limited availability of international mutual funds for Indian investors since February 2022, pushing them towards direct investment channels.

Impact: This news signals a maturing Indian investor base prioritizing global diversification, currency hedging, and access to innovation-led sectors. It can lead to significant capital outflow from India, potentially impacting domestic market liquidity and valuations, while offering Indian investors enhanced growth opportunities and risk diversification. Rating: 8/10

Difficult Terms: * **Equity**: Ownership in a company, represented by shares. * **Underwhelming Returns**: Lower-than-expected profits or gains from investments. * **Tepid**: Lacking enthusiasm or force; moderate. * **Proliferation**: Rapid increase in numbers. * **Do-it-yourself (DIY) investment routes**: Investment methods where individuals manage their investments directly rather than through an advisor. * **Liberalized Remittance Scheme (LRS)**: A scheme by the Reserve Bank of India allowing resident individuals to remit funds abroad for various purposes, including investments. * **Know Your Customer (KYC)**: A process to verify the identity of clients. * **Retail Investor**: An individual investor who buys and sells securities for their own account. * **Year-on-year (y-o-y)**: A comparison of data from one period to the same period in the previous year. * **Traction**: The action of pulling or drawing the attention of others; gaining popularity or momentum. * **Global Diversification**: Spreading investments across different countries to reduce risk. * **Currency Hedging**: Protecting against potential losses from fluctuations in currency exchange rates. * **Innovation-led sectors**: Industries driven by new technologies and groundbreaking ideas, such as Artificial Intelligence or Semiconductors. * **Underrepresented**: Not receiving enough attention or investment compared to their potential. * **Domestic markets**: The financial markets within a country. * **Exchange Traded Funds (ETFs)**: Funds that trade on stock exchanges, much like stocks. * **Capital Gains Tax**: Tax on the profit made from selling an asset like stocks. * **Inheritance Tax**: Tax on assets transferred from a deceased person to their beneficiaries. * **Dividend Withholding Tax**: A tax deducted at source on dividends paid to shareholders. * **Corporate Governance**: The system of rules, practices, and processes by which a company is directed and controlled. * **Disclosure Standards**: Rules requiring companies to publicly report financial and other relevant information.