Donald Trump’s Presidency: Is this an opportune time for Indian investors to get exposure to the US market?

Many investors are eagerly waiting for Donald Trump to take over as the 47th President of the United States on January 20, 2025 as it is likely to cause a spike in the benchmark indices of US markets. While regulatory roadblocks make investing directly in US stocks seem cumbersome for domestic investors, there’s one easy route i.e., mutual funds.

With the availability of a number of exchange-traded funds (ETFs) or fund of funds, one could ride the wave of an eventful bull run by participating in the US market. So, let’s discuss some of these choices and explore how it would be prudent to invest in the US market in 2025.

Why make investments in the US stocks

1. Potential for growth and diversification: As experts state, the United States market will give Indian investors more choice in terms of the types of sectors and businesses in which to invest. Furthermore, US equities and exchange-traded funds offer geographical diversification, thus enhancing risk mitigation.
2. Innovation and technology:Most of the advanced sectors are found in the United States, especially technology sectors. The American technology-based companies will soon be enjoying many advantages with the arrival of artificial intelligence and many more new innovations.
3. Trump’s pro-business policies:The new administration’s possible tax cuts and pro-business policies are likely to boost the performance of United States equities. Some degree of fluctuations is expected; however, the prospect for long-term growth looks positive.
4. A well-balanced portfolio is important: However, Indian investors should not forgo implementing such a balanced strategy, regardless of whether their strategy is one involving direct buying US stock or otherwise through the ETF.

Expert views on investing in the US market in 2025

Investing in the US markets can be a smart diversification strategy for Indian investors in 2025. The key reasons include diversification, as the US market offers a broader range of opportunities across sectors, and new policies that may drive strong economic growth. Additionally, the strong dollar contributes to economic certainty, making US investments attractive.

Swapnil Aggarwal, Director, VSRK Capital, says “The best options for investing in the US markets in 2025 are US-focused ETFs and index funds, which provide diversified exposure, sector-specific funds focusing on technology, pharma, and healthcare, and direct investments in US stocks. Indians should consider adding US market exposure to their portfolio, particularly through ETFs, to benefit from potential growth. However, maintaining a balanced portfolio is crucial to maximize returns.”

Through ETFs and FOFs

One of the best ways to get exposure to the US market is to invest via fund of funds or ETFs.

“Indian investors have till now been investing in US through mutual funds here, but they can easily and directly consider ETFs listed in the US – such as SPDR S&P 500 ETF Trust, iShares Core S&P 500 ETF, Vanguard US Total Stock Market Index or iShares Russell 1000 Growth ETF or others. Investors with a slightly greater risk-appetite can consider ETFs like Invesco QQQ Trust — a well-diversified leveraged ETF that has consistently outperformed the market. It’s delivered approximately 30% returns year-to-date,” saysSubho Moulik, CEO & Founder, Appreciate.

Nascent sectors

One key reason for looking beyond the Indian market is to be able to invest in sectors which are at a nascent stage in India.

“Investors can also gain exposure to sectors not accessible in India. For instance, the AI boom has largely benefitted tech giants based in the US. An ETF like iShares U.S. Technology ETF, for example, would help investors take diversified positions in the US technology sector to ride the AI boom,” addsMoulik.

A retail investor can invest directly in US stocks and ETFs through the Liberalized Remittance Scheme (LRS), which allows Indians to invest up to $250,000 in overseas assets.

A word of caution

It is vital to note that most India-based mutual funds have closed fresh investment from investors because these schemes have already hit the regulatory thresholds set by the RBI.

There is a cap on the total amount Indian mutual funds cumulatively can invest in foreign securities. There is a total industry-wide cap of $7 billion and a $1 billion cap for each fund house.

Notably, the Sebi last month revised its rules wherein it allowed Indian mutual funds to invest in foreign funds which invest a portion of their funds (upto 25%) in India, thus opening the door a little wider.

“It’s also worth noting that many India-based funds with international exposure are currently closed to new investments, limiting available options. One alternative is using the LRS to invest directly in overseas markets,” says Alekh Yadav, Head of Investment Products at Sanctum Wealth.

Sujit Modi, CIO, Share.Market has a word of caution for investors. “Utilising ETFs and FoFs can provide a straightforward and efficient means to gain this exposure. However, it is important to note that many international ETFs are currently trading at a premium to their NAV (net asset value). This is because the foreign investment limit has been reached and no new supply is currently entering the market. This means that the investors are paying more than the actual value of the ETFs, increasing their break-even point. Therefore, it’s crucial to conduct thorough research, consider individual financial goals, and assess risk tolerance before making investment decisions.”

Conclusion

Investment in the US market for 2025 would be an extremely profitable option for Indian investors who would seek to diversify their portfolios and enjoy the growth trends occurring globally. By following proper investment techniques, including buying ETFs or FOFs, an investor may benefit through the country’s economic expansion, technological innovation, and its amenable policies. This is achievable while keeping the whole strategy balanced and also considering long-term growth.