Limiting your investments to India might mean overlooking substantial profit opportunities and important safety buffers. This was a key point made by financial experts at the recent Mint Horizons event in Mumbai, a leading masterclass on global investing.
The discussion featured several prominent figures in finance, including Saurabh Mukerja, Founder and Chief Information Officer of Marcellus Investment Managers; Nirmal Bari, Director of PPFAS Alternative Asset Managers IFSC; and Mikhail Top from DSP. Notable fund managers like Natraj S., Vivek Iyer, Subho Moolik, and Dharmendra Jain also participated. Aashish P Somaiyaa, co-founder of Ionic Wealth, shared insights with Neil Borate, editor-in-chief of The Fynprint, focusing on how to identify global opportunities, particularly through India’s new financial hub, GIFT City. They delved into strategies for diversifying investments and managing risk on a global scale.
Global Diversification Examples
Investing outside of India primarily stems from the low correlation between various markets. Essentially, while the Indian market might slip, markets in the US or elsewhere could be on the rise, helping ensure smoother portfolio growth through effective diversification.
You can catch the full episode below.
Saurabh Mukherja emphasized the “broken” relationship between India and the US over the past 15 years, noting, “The takeaway is clear. You have two powerful markets, India and America, with a very low correlation. It’s fascinating. You shouldn’t put all your money in one country and just hope for the best. That’s not investing; it’s just speculation.”
He made an intriguing observation about investing in India’s growth. Many global companies, like Apple and Microsoft, earn significant profits from Indian consumers. “If you want to take advantage of India’s growth, you need to invest in firms outside India. Listing these companies in India would only yield $20 billion annually. To truly benefit from India’s economic expansion, you have to consider companies on the NYSE that earn a lot more from India than most local firms.”
Mukerja proposed a model where an average Indian investor might allocate 60% of equities toward Indian assets and 40% toward dollar-based ones, given the correlation rate of roughly 25-30% between the two markets.
GIFT City: A New Path to Global Investing
Gujarat’s GIFT City, as India’s first International Financial Services Center (IFSC), is rapidly becoming the go-to place for Indian and global investors aiming for easier access to overseas assets. Panelists discussed the regulatory and product innovations facilitating this trend.
Marcellus, which rolled out its first global product three years back, recently introduced the Nasdaq ETF at GIFT City to cater to rising corporate interest. “Nine months ago, the Reserve Bank of India launched the Overseas Portfolio Investment regime, allowing any company, including Marcellus, to invest half of its net worth abroad through GIFT City,” Mukerja pointed out, highlighting the favorable environment for international investments.
PPFAS has fully established a Foreign Portfolio Investor retail license at GIFT City, making it possible to launch various funds. Nirmal Bari noted, “So far, we’ve initiated wealth management services targeting active outbound investments, focusing on a globally diversified portfolio of around 20-30 stocks.” The strategy centers on selecting stocks with diversified revenue sources that aren’t overly reliant on any single economy.
DSP has introduced its first retail fund at GIFT City, aiming to attract a broader investor demographic. Mr. Natraj S. explained their approach: “We maintain the same principles. Our goal is to achieve long-term dollar returns of 12-13 percent. We’re agnostic to indices; our focus lies on where real value can be found, even though global pricing has recently risen. We plan to gradually build our portfolio.” DSP’s retail fund has a minimum investment of $5,000, allowing for global diversity.
Differentiated Strategy
The event showcased unique strategies that extend beyond conventional large-cap funds, which are accessible via the GIFT City AIF route.
Gold Miners and Niche Sectors
Investing internationally offers unique access to asset classes and sectors that are simply unavailable in India. Vivek Iyer’s experience in launching Vivek Fund, focusing on gold miners, perfectly illustrates this point.
“India lacks gold mining companies, so we must look abroad. Honestly, one of the most significant reasons for international investment is to gain access to sectors that are otherwise unreachable in India. For that exposure, overseas investments are essential,” Iyer remarked, reflecting on his journey stemming from his work with family offices.
Global Innovation and Emerging Markets (Excluding India)
Dharmendra Jain from Ioniq, focused on making investments more inclusive, discussed a bottom-up strategy for the Global Innovation Fund. “We view technology as an economic horizontal rather than a vertical, with about 36% exposure to the US and 27% to the Far East, including countries like China, Taiwan, and South Korea,” Jain explained.
Aashish P Somaiyaa from White Oak Capital Management highlighted often-overlooked opportunities in other emerging markets. The firm exclusively manages funds focused on emerging markets alongside India. “Emerging markets have severely lagged for years. But if you invest in emerging markets excluding India, you gain exposure with a correlation of 0.6 with India, which complements your Indian investments,” Somaiyaa argued, suggesting further diversification within that segment.
Somaiyaa shared his experience launching the first US-focused fund in India. “I remember those lengthy conversations. I traveled across the country and only raised 65 billion. That’s quite a hurdle. The NASDAQ fund was relatively small, at 8 billion to 9 billion, until it began growing significantly after several years.”
Platforms and Taxation: Reducing Investment Friction
The discussion wrapped up by addressing key themes like accessibility and taxation. Subho Moulik from Appreciate talked about how digital platforms are making globalization easier.
“In fact, I believe that increased digitalization has lessened investment friction. Mechanisms like TDS can now be conveniently offset against other taxes. This makes it easier to access Marcellus and other funds through platforms like ours,” Moulik stated.
“Now, digital investing is entirely streamlined; registration can happen in about 2-3 minutes, and transactions can be completed in roughly a minute. We expect the number of international investors to reach double digits in the coming years,” he added.
Regarding taxation for Indian investors, Somaiyaa outlined significant points about investments made through the GIFT City framework.
The main takeaway from Mint Horizons is that international diversification is no longer exclusive to the wealthy but is essential for every discerning Indian investor. With low correlations, unique asset access, and the advantages of GIFT City’s efficient structure and user-friendly digital platforms, it’s an opportune moment to explore global markets.
