Here’s how Indian investors can leverage the IPO wave in the US

Thinking of buying international stocks, but confused? Here’s how to invest in international stocks from India

Have you ever wanted to invest in international markets like the US from India but didn’t know how to?

Then, here is the good news. According to the RBI’s Liberalised Remittance Scheme (LRS), Indian investors can invest up to 250,000 USD per year without special permission.

One of the major objectives of investing in global investment markets like the US is that the US is home to popular companies such as Amazon, Apple, Google, Facebook, Microsoft, etc. Moreover, many innovative US companies and leading global companies are going public in the US. Having access to the US market allows the opportunity to buy these high-growth companies.

Why Leverage IPOs in the US?

Last year, Airbnb went public and posted one of the biggest first-day rallies on record by reaching over a $100 billion valuation, pleasing early-round investors. Here are a few most popular IPOs of 2021 that took place in the US:

• Coinbase
• Robinhood
• Coupang
• DiDi Chuxing
• Coursera, among others

Investing in the US market doesn’t just offer Indian investors the chance to invest in US stocks. Companies across the world, based in economies like South Korea and China, are choosing to list on US stock markets. Investing in the US, in many ways, is investing in up-and-coming stocks from several dynamic markets across the world. 

Here’s a few companies that will go public in 2021:

• Instacart
• Discord
• Grab
• Nextdoor
• Rivian

Indian companies are eyeing US IPOs too

Chinese and Korean brands aren’t the only ones eyeing a listing on the US market. Indian companies with a global focus, like InMobi and Pine Labs are seeking to list in the US exchanges. Indian business software company Freshworks was listed on the Nasdaq recently with an opening market cap of $12.3 billion. The key reason is why companies choose the US exchanges for listing access to a global capital pool - significantly more funding than is likely to be collected in an Indian IPO. For Indian investors, the ability to invest overseas raises the opportunity to invest in the future of strong Indian brands while simultaneously diversifying their portfolios.

How can Indian investors invest in US IPOs?

It is important to note that Indian investors can’t directly participate in US IPOs - i.e., at the IPO allotment stage. However, these stocks are accessible immediately after the initial listing through platforms like Globalise, meaning that this is still very much a viable option for investors looking to get in early on promising publicly listed brands.

Below, we have listed different ways you can leverage the IPO wave in the US.

To invest in US stocks from India and build exposure to recent or upcoming IPOs, follow these three steps.

1. Open an overseas brokerage account
2. Invest in recent or upcoming IPOs by:
   • Directly investing in stocks as soon as they go public.
   • Investing in ETFs that provide exposure to newly listed companies.
3. Evaluate the risks associated with international investing.

Open an overseas brokerage account

Many brokers in India have tie-ups with brokers in the US. These Indian brokers act as an intermediary and execute the trades on your behalf. Indians can also open trading accounts directly with US brokers such as Charles Schwab, Ameritrade, or Interactive Brokers.

Top overseas brokers like Globalise make this process extremely easy with a simple onboarding process in a matter of minutes. Here’s more on how you can open a brokerage account.

You will need to produce documents for online verification and abide by standard regulations. An investor must register for a liberalized remittance scheme (LRS) with their bank.

Directly invest in stocks as soon as they go public

Upon registering for LRS, you can fund your US brokerage account and start investing as and when a company is listed publicly.

Invest in ETFs that provide exposure to newly listed companies

Renaissance Capital offers an ETF that focuses exclusively on the US IPO market. This fund, Renaissance IPO ETF, provides exposure to the most significant newly public US-listed companies in a portfolio.

Evaluate the risks associated with international investing

Market movement and market risks are inevitable even in the US market. It is imperative that one understands their financial goals and requirements and makes educated decisions when it comes to such investments. Make sure to do your due diligence and take things like taxes, risk tolerance, etc., into consideration.

Adequate research while investing in single-name stocks, especially newly listed companies is crucial to avoid risks. Newly listed companies generally do not have financial track records in their filing and there are no proven instances of their management team’s ability to lead a public company. There is also the risk of higher volatility during the initial earning seasons and potential expectation mismanagement when it comes to delivering against stated targets.

A guided investment process eases these research requirements and qualms. Investing in exchange-traded funds or ETFs or portfolios managed by experts tend to derive benefits while reducing the risks.

Leveraging US IPOs: Bottomline

International investing has many benefits especially when it comes to leveraging US IPOs. Investing in IPOs that prove to be successful and sustainable in the long run can be powerful in your financial or investment journey.

The process of investing in US IPOs is made less overwhelming and more seamless by solutions like Globalise. Globalise removes the key pain points international investors can face while looking to invest in newly listed innovative US companies and leading global companies.