Investing in both US and India

 The video transcript features a discussion between Saurabh Mukherjea (CIO of Marcellus Investment Managers) and Nandita Rajhansa (Economist) regarding the strategic necessity of diversifying investments between the Indian and US stock markets.

The following is a summary of the key points discussed in the sources:

The Problem: Constant Rupee Depreciation

• Historical Trend: Since 1991, the Indian Rupee (INR) has consistently lost approximately 40% of its value against the US Dollar (USD) every decade.
• Economic Rationale: This happens because inflation in fast-growing developing economies like India (affecting costs for healthcare, education, and transport) is significantly higher than in richer countries like the US. To keep exports competitive, the currency naturally depreciates.
• Impact on Wealth: A typical Indian family faces heavy taxation (Income Tax and GST) followed by currency depreciation. Consequently, out of every $100 earned, a family may only have $30 left in real terms to fund retirement or education after these factors take their toll.

The Solution: The 50-50 Investment Strategy

• Double-Digit Returns: India and the US are the only two major global markets that have consistently delivered double-digit dollar returns over 10, 20, and 30-year horizons.
• Low Correlation: The correlation between the two markets is low, meaning they do not always move in tandem; when one market underperforms, the other often holds up well.
• The "Markowitz" Effect: By maintaining a 50-50 split and rebalancing annually, investors can achieve higher returns with lower volatility. For example, while both the Nifty 50 and S&P 500 gave roughly 14% returns over 20 years in rupee terms, a rebalanced 50-50 portfolio would have yielded 15% because rebalancing forces you to "buy low" in the cheaper market and "sell high" in the expensive one.

Regulatory Reforms and Accessibility

Prior to 2023, global investing was largely reserved for the elite due to high capital requirements and "brutal" taxes. However, the Indian government introduced four major reforms to democratize access:

1. Gift City (IFSC): Created a legal framework (International Financial Services Centre Act, 2020) that allows Indians to manage global investments from within India.
2. Tax Harmonization: In July 2024, the Long-Term Capital Gains Tax (LTCGT) for foreign investing was reduced from 20% to 12%, matching domestic investment rates.
3. Liberalized Remittance Scheme (LRS) Easing: The RBI simplified the process for individuals to use LRS funds to invest or spend abroad (e.g., for foreign education or holidays) via foreign bank accounts.
4. Overseas Portfolio Investment (OPI): Since August 2022, Indian corporates can invest up to 50% of their net worth abroad through Gift City.

Practical Implementation

• US Dominance: The US currently accounts for 70% of the world's market capitalization and 55% of global profits, largely driven by its dominance in technology (AI, Cloud, and software).
• Investment Options: Investors can access these markets through vehicles like the Global Compounders Fund based in Gift City or by investing in benchmarks like the Nasdaq, which has delivered nearly 20% returns in rupee terms over the last decade.
• Conclusion: The speakers emphasize that while it is important to maintain a presence in the home market (India), splitting investments 50-50 with the US market is the most effective way to combat rupee depreciation and build long-term wealth for global aspirations.