Should You Invest In US Stocks: Dollar-Rupee Volatility Question

Most of the Indian traders, who are engaged with the equity markets are interested in Indian company stocks, ETFs, or government bonds. Domestically, the NIFTY and SENSEX are at bullish positions now; both long-term and short-term investors are making profits. But why the question of US stock is getting attention now? The reason is especially the market volatility of stock exchanges, and diversifying the risks.

Market volatility

At present, US stock markets are in good positions. Dow 30, Nasdaq 100, and S&P 500, all 3 have increased considerably in the last 5 years to more than 16.03%, 25.89%, and 17.27%, respectively. The US economy is on the verge of post-pandemic recovery. The employment data, manufacturing data are indicating that way. So, the economy is developing fast again. The White House, thus, is having faith in US Fed Chair Jerome Powell. Hence, there are signs that the US equity markets will evolve further in 2022. with =infusion liquidity to the economy by US Fed, the stock markets have boomed after the pandemic.

Rupee-dollar tug

The INR has depreciated by around 12% against the US dollar. At the time of investing, an Indian investor needs to convert INR to the US dollar. Similarly, the US dollar will be converted to INR, when the money will be pulled back to India again. A depreciating rupee, in that case, will certainly offer a better return, if converted from the US dollar. One can earn more INR. Although the INR is in an appreciating mood now, the situation later can differ in the next year. So an investor should be prepared. The way investors diversify their portfolios by investing in an asset class like gold, investing in the US dollar can do the same job with an appreciating US dollar. Sharing an example, Anup Bansal, Chief Investment Officer, Scripbox told Financial Express, "On September 30, 2016, the Nasdaq 100 was at 4875.7, and the US dollar was 66.55 INR. If one had invested in one unit of Nasdaq 100 index converting INR into US dollar, then the holding value in INR terms would have been Rs. 3,24,478. On October 1, 2021, the Nasdaq 100 was at 14792 and the US dollar was 74.13. The holding value in INR terms after 5 years is Rs. 10,96,536, that is a net gain of 238% in INR."

Currency hedge and commodity prices

"Over 2022, we expect a larger trade deficit due to a stronger recovery in imports, which will likely offset some of the appreciation pressure on the rupee...A weaker rupee may also be favored by the RBI to maintain export competitiveness," According to the ANZ Bank, reported by the FXSteet. Now the commodity prices like oil prices and gold rates are gaining in the international markets. With a depreciating INR and gaining commodity prices, investment in US stocks can aid Indian investors. It might work as a currency hedge. Apart from depending on only one economy, investors can explore different grounds of equity. As the pandemic changed our economic development largely since last year, the equity market is also quite volatile now. Hence, the investors should research and plan better to hold the equities for longer periods to gain good returns.