NEW DELHI: Brokers dealing in US stocks have seen a worrying trend in the behaviour of Indian investors betting money on Nasdaq-listed stocks: they have started buying shares of small, unproven electric vehicle companies.
Electric vehicles is one of the sectors that has no listed peers in India, and hence, Indians went after the biggest EV maker in the world, Tesla, during the pandemic. But as Tesla shares reached elevated levels, these investors turned to lesser-known EV makers.
“Electric vehicles is a space where we have seen a lot of interest, and that could be a bubble as well. Because, apart from Tesla, a lot of these companies are very small. A bunch of people are investing in them in the hope of compounding money. It is an interesting trend, but one should tread with caution,” said Viram Shah, CEO and Co-Founder of Vested Finance, a US Securities and Exchange Commission-registered investment adviser.
Shah said beyond Tesla, Indians have started buying stocks like Nikola, Blink Charging and Nio – some of which have not generated any revenue yet.
Nikola is an EV truck maker, which is not expected to roll out any product before 2022. Blink Charging is a maker of EV charging stations and Nio is a little-known China-based electric vehicle manufacturer.
Riding on the increased interest, shares of Blink Charging have surged nearly four-fold in last 45 days. Similarly, ADR share prices of Nio have doubled in the last two months.
Overall, Indian investment is focused on large tech companies and pharma stocks. “People wanting to invest in the US are preferring large tech brands. There is rising interest towards pharma in view of the developments around Covid vaccine. Pfizer and Moderna have seen interest post vaccine announcements,” said Shah
Data shared by Winvesta, another firm that operates a platform to facilitate investment in foreign securities, showed FAANG stocks form nearly one quarter of all investments from India via the platform. FAANG refers to Facebook, Amazon, Apple, Netflix and Google.
Indian inventors, who were already investing in US stocks in good numbers, became more active after the US presidential election, as it cleared an overhang on the market, giving visibility for the next four years.
“The customer base grew 260 per cent in third quarter and is likely to double in Q4. AUM grew by 400 per cent in Q3. Win vesta claims 30 per cent growth in its client base and 40 per cent expansion in assets in the first three weeks since the November elections.
Swastik Nigam, CEO of Winvesta, said the average order size on his platform was close to $900 in Q3 with a median size of $200. Individual transaction sizes varied from less than $1 to over $10,000.
With success in the US markets, brokers are also open to unlock avenues for Indians to invest in other territories. Currently, there is no easy way for retail investors to invest directly in, say, 2020’s best performing Asian markets of South Korea, or the UK, where stocks are available relatively cheaper.
Shah of Vested Finance said he is looking at the three interesting markets of the UK, Singapore and Hong Kong, which are offering great opportunities.
“The immediate plan is to educate investors in terms of why adding international exposure is good for their portfolios. Through the US markets, investors are able to invest in ETFs that hold European or Brazillian shares. Plus, ADRs are available from major companies. Once we can reach a certain scale, we would look at unlocking direct access to other markets,” he said.