Technology Stocks: Even worse, the majority of these stocks had already experienced year-to-date declines of between 30% and 70%. The recent crash would have increased the pressure on the stockholders.
At the end of September 2022, Indian mutual funds held stocks in Meta valued at just under Rs 1,100 crore, according to data from primemfdatabase.com. In total, the programmes invested more than Rs 12,300 crore in renowned tech firms like Microsoft, Netflix, Alphabet, Amazon, and Meta. These investments would have suffered greatly from the latest downturn.
For instance, Alphabet is down about 8% whereas Meta alone is down almost 30% over the past month.
Given the large weighting of technology stocks in indices like the Nasdaq 100 and NYSE FANG, several schemes have invested a sizeable amount of their corpus in them. The weighting of tech stocks in the S&P 500 index is over 25%.
Not only that. According to figures from the RBI, Indians remitted $19.6 billion abroad in FY22, of which $747 million was invested in equities and debt. According to estimates from the sector, $300 million of this would have been invested in stocks and ETFs, with at least 40% going to technology stocks.
This year’s market fall in the US has been led by technology equities, which have declined as the yield curve has gone upward.
A dismal revenue projection in the midst of a difficult period for digital advertising businesses caused Meta shares to fall roughly 25% on Thursday, the most in a single day since February. Alphabet’s third-quarter revenue and profitability fell short of estimates on decreasing advertising sales, sending its shares down almost 6% over the previous five days. As-hours trading on Thursday saw a nearly 20% decline in Amazon stock after the business revealed that its crucial holiday shopping season will be lower than anticipated.
Sean Darby, chief global equity strategist at Jefferies, said: “I do like US tech companies, but the scenario is terrible because equities are in a no-land man’s right now and people are very, very negative under these circumstances.”
“It will get harder to determine the multiples you would pay to growth stocks. The paradox is that many tech stocks will perform admirably if we’re wrong and this is a balance sheet and credit solvency recession rather than a growth recession since the market will place a premium on their cash flows. You might believe that multiples have been adjusted for reduced earnings, but then rates rise and the multiple is once again modified, said Darby.
Experts assert that the performance of US equities and the US currency are the two factors that govern Indian holdings abroad.
“After a temporary respite, investments in technology companies have begun to pick up steam in the past two months as valuations have become considerably more appealing as a result of the sharp fall. Especially with the cash-rich and larger market-cap businesses like Alphabet, Apple, and Microsoft, this could be a good time to invest, according to Sitashwa Srivastava, co-founder and co-CEO of Stockal.
Indian investors require geographic diversification, and the easiest method to gain exposure to worldwide markets is through international funds. Direct investments can be made using either an overseas trading account with a foreign broker with a presence in India or an overseas trading account with a domestic broker who has a partnership with stockbrokers in the US.
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Global stocks should, however, be included in the auxiliary portfolio, and the allocation must be made as such, according to experts.
“Just because the tech stocks have declined, investors shouldn’t consider timing the market or making lump-sum investments. I wouldn’t have the courage to invest a large sum merely because tech stocks have declined. That would be comparable to market timing, according to independent mutual fund expert Vicky Mehta.
“No one truly knows how much misery the tech sector still has in store. What if these equities continue to decline over the course of the following two quarters?
However, now would also not be a good moment to sell. Stick to your asset allocation instead, and if the total allocation has declined, add tech or international equities gradually, said Mehta.
According to Srivastava, investors continue to keep their money in dollars because they think the value of the dollar relative to the Indian rupee would increase. Because more and more people are keeping cash on hand, the cash balances at our company have increased from 3-4% to 10% during the past year. In order to give investors a temporary place to store their money, we are developing fixed income products, the executive said.
Many Indian investors associate US investing with the well-known FAANG stocks. Tesla, GameStop, AMC Entertainment, Palantir Technologies, NIO and other well-known IT companies.
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