Want to invest in US equity markets? Vested Finance CEO Viram Shah shares his ideas

Key indices in the US stock markets—Dow Jones Industrial Average index, Nasdaq and S&P500—are hovering at record-high levels, rallying up to 19% on a year-to-date basis. So, what is fuelling the rally? In an interaction with Business Today, Viram Shah, CEO, Vested Finance, shared his insights on the ongoing rally in the US stock markets. He also talked about global markets which are looking attractive at this point of time. Edited excerpts:

BT: US markets have been on a roll. Is it a broad-based rally or are you seeing select stocks or sectors driving the market?

Shah: The recent rally in US markets has primarily been driven by a select group of technology stocks rather than a broad-based surge. Notably, the Nasdaq Composite index (up 19% YTD) has outperformed the S&P 500 (up 17% YTD), with major contributions from tech giants like Nvidia, Amazon, Microsoft and Alphabet.

These companies have been pivotal in propelling the market higher, with Nvidia alone accounting for nearly a third of the S&P 500’s gains this year. While the tech sector has shown remarkable strength, other sectors such as financials, energy and materials have also gained attention, largely influenced by rising interest rates and inflationary pressures. However, the overall market participation remains limited, indicating that many stocks and sectors have yet to catch up to the performance of these leading firms.

BT: Beyond tech, what are the sectors that have been in focus?

Shah: In the US, sectors like financials, energy and materials have been in the spotlight, driven by rising interest rates, oil prices and inflationary pressures. Meanwhile, communication services and information technology have shown resilience, buoyed by robust advertising and subscription revenues and strong economic growth. Real estate, however, has been vulnerable to higher interest rates but still benefits from overall economic expansion.

BT: Any recommendations for India-based investors? With the rapid surge, are valuations a concern for the US market?

Shah: The US stock market presents both exciting opportunities and potential valuation concerns for India-based investors. The market is home to many leading global companies, offering high-growth potential and diversification. However, the rapid surge in the US stock prices has led to elevated valuations, particularly in the tech sector, which could be impacted by factors like interest rate hikes and economic uncertainty.

The key is to adopt a balanced approach—judiciously selecting US stocks with strong fundamentals and growth prospects while maintaining a diversified portfolio to mitigate valuation-related risks. By carefully assessing market conditions and aligning investments with one’s risk profile, Indian investors can potentially benefit from the dynamism of the US equity market.

BT: What are your expectations for US interest rate cuts? Will that, whenever it happens, fuel the rally further?

Shah: The current consensus is that the Federal Reserve is likely to consider interest rate cuts in the near future, potentially as early as the next meeting. While a reduction in the US interest rates could benefit Indian investors by reducing borrowing costs and boosting global equity markets, the overall impact would be contingent on numerous variables.

A decrease in the US rates could alleviate financial burdens for Indian borrowers, lower the cost of commodities priced in dollars and stimulate economic growth. However, there are concerns that rate cuts could also trigger worries about sustained inflation. Given the complex and uncertain nature of this potential impact, Indian investors should take a balanced approach, considering other macroeconomic factors, diversifying their portfolios and aligning their investments with long-term financial objectives and risk profiles, rather than solely relying on the prospect of US rate cuts to drive a market upswing.

BT: You have started selling private bonds on your platform. How has been the response from investors?

Shah: We have received a positive response from investors for our private bond offering. We have broadened our alternative investment portfolio to encompass peer-to-peer (P2P) lending, bonds and solar projects, providing investors with diverse options and potentially higher returns.

The significance of alternative assets and the future potential of these investments express the company’s commitment to facilitating investor portfolio diversification with ease across bonds, solar, P2P lending, real estate and global stocks, in addition to traditional mutual funds and fixed deposits.

BT: Beyond the US, which markets seem more promising from a long-term investment point of view?

Shah: Looking beyond the US, Europe stands out for its economic recovery and supportive monetary policies, while India’s strong growth and reforms make it an attractive destination.

China’s resilience and growing domestic consumption also make it a compelling option and Japan’s recovery and innovative technologies add to its appeal. Additionally, Southeast Asia’s emerging economies, such as Singapore, Indonesia and Vietnam, offer promising opportunities driven by their growing economies, young populations, and increasing regional integration, making them worth considering for long-term investment potential.