A comprehensive guide for Indian investors to invest in US tech giants
We spoke with Mr Viram Shah, Co-founder and CEO of Vested Finance, to get his insights on this trend.
The Indian IT giant Tata Consultancy Services (TCS) has set the ball rolling for the Q4 earnings season with a bang. TCS announced a consolidated net profit of almost 15 per cent YoY for the quarter ending March 31, 2023. The company also reported an impressive order book of USD 10 billion during the quarter, which has put it in a strong position for future growth. To top it off, TCS has declared a final dividend of Rs 24 per share for FY23, adding to the cheer of its shareholders.
As the earnings season unfolds, the US market is expected to keep a close eye on the corporate performance of companies, especially in the wake of the two biggest bank failures since the 2008 financial crisis. Investors will be looking for signs of resilience and growth in the face of economic headwinds.
However, beyond the immediate earnings season, there is a growing interest among Indian investors in the US tech giants. We spoke with Mr Viram Shah, Co-founder and CEO of Vested Finance, to get his insights on this trend.
1. The interest of Indian investors in the Netflix, Microsoft, Apple, Google and Amazon stocks
Despite a not so good earnings reports by some of the technology companies, net buying (buy sell) volume has remained constant.
The average weekly buying volume per user has remained constant.
Of course, some of the stocks have witnessed an increase in buying post the results. But on a week-over-week or month-over-month basis, the trend remained constant.
FAANG companies are still in the top 15 most active traded stocks on the Vested platform.
2. Trends in US tech stocks among Indian
Investors are looking at tech equities. Despite the decline in market value, investors purchased the top tech stocks via the Vested Platform.
By transaction count (top 5)
1. Amazon
2. Apple
3. Tesla
4. Microsoft
5. Google
By transaction value (top 5)
1. Tesla
2. Amazon
3. Apple
4. Google
5. Microsoft
3. US corporate earnings for quarter ended December 31, 2022 and insights relevant to Indian context
Investors continue to invest in tech-based stocks, especially mega caps and large caps.
Mega-cap stocks have been experiencing higher-than-average volatility in recent times. Lower earnings growth and a tightening of Fed rates could mean they may expect more pain in the short term.
Two factors will work in favor of Large-Cap and mega-cap stocks. First, consumption in the USA hasn’t slowed down. So, the more prominent companies will continue to attract consumers despite a general slowdown across industries. This will benefit large-cap and mega-cap companies in generating steady cash flows.
Second, with the rise in uncertainty due to inflation and war in certain developed countries, investors will rush to buy the large-cap and mega-cap operating globally to diversify their portfolio and minimize the overall risk.
Against this backdrop, some investors may find an opportunity in Megacap stocks, given their strong financial and steady cash flows. These companies have sufficient capital to withstand market fluctuations and may be in a better position to weather out the storm.
4. Learnings for investors from Apple/Microsoft/Meta/Amazon's earning for quarter ended December 31, 2022.
Last year, FAANG or FAANGM stocks saw the most significant fall, however, some stocks have recovered reasonably well from lows. Also, high inflation and FED, indicating is still raising interest rates, have meant that growth in these stocks will likely remain slow in the near future.
However, we cannot say that these stocks are losing their sheen.
Looking at some numbers, let us not forget that Apple still has 1 billion users and Meta Platforms (Facebook) and its’ family of apps still have 3 billion unique users worldwide. Facebook alone has more than 2 billion daily active users.
If we talk about Alphabet (Google), it still is the market leader in email, search, and digital ads. Netflix has over 220 million paid subscribers. Microsoft and Google are integrating AI capabilities in the browser to redefine search altogether.
If we look at the last decade; the growth in the share price of these companies has been quite robust. So, even as the growth is slowing down, it is too early to write off these companies.
5. What does the US inflation mean for Indian investing during the earnings season?
US Fed policies, especially related to interest rates, are extremely important for investors to keep an eye on.
Changes in interest rates can have a considerable impact on the stock market, bond market, currency markets and other economies such as India and China. The main reasons are (i) all economies are interdependent and decoupling in real-time is not that easy after all and (ii) the US dollar remains a leading currency in international trade.
Interest rate changes can also affect the cost of borrowing money, which can impact businesses and individuals. By monitoring US Fed policies, investors can gain insights into the direction of the economy and make more informed investment decisions.
6. Learnings from performance
It is important to do your research and understand the risks associated with equity investing. You should also be aware of any macroeconomic and political trends that could potentially impact the performance of the stock markets.
Three important things to keep in mind:
• It is important to have a diversified portfolio and not to put all your eggs in one basket. Geographic diversification is an important piece of diversification that’s missing in the majority of Indian investors’ portfolios.
• It is important to remember to manage your risk and to review your portfolio regularly to ensure it is still in line with your goals.
• If you spend time researching individual companies, then look for solid businesses that are able to generate profits without taking on debt. ETFs are the best option to build one’s portfolio.