Various economic conditions of the past several years have led many people in India to explore financial investment. Often, these conditions are traced back to the Covid-19 pandemic and its wide-ranging effects on society. The pandemic caused job loss and salary cuts and general economic hardship, leading many to think about how they might bring in extra income. It also forced people to stay home, meaning that the search for extra income often had to happen digitally and remotely.
Investing was not the only solution, of course, but the numbers indicate that it is an avenue many have turned to since the onset of the pandemic. Business Today reported recently that 17% of all Indian households (and some 80 million unique, individual investors) are now invested in the Indian stock market. This represents a clear rise and a “notable share” of wealth being channeled into the markets.
More investment can make for a more robust economy on the whole, and individuals who are strategic about their trading do stand to protect and even grow their wealth. With so much new trading activity occurring in India, however, it is fair to wonder what the best methods and avenues of investing in India are at the moment. Naturally, the National Stock Exchange (or NSE) is one option that comes to mind.
This is where the share prices of publicly traded Indian companies are listed and can be bought and sold by traders. Beyond the NSE, however, there are two additional avenues for investment that are well worth exploring for the average Indian trader: the NIFTY 50 and global stock markets.
For those who may not be familiar, the NIFTY 50 is an index fund that is meant to provide a general benchmark for the NSE as a whole. While it is not comprised of the entirety of the NSE, it is designed to represent the average movement between 50 of the biggest stocks that are traded on the NSE, weighted by market capitalization. As such, the NIFTY 50 does not completely match the National Stock Exchange.
It does, however, function as a single asset whose strengths and weaknesses loosely represent the state of the NSE more broadly. More to the point, stakes in the NIFTY 50 can be bought or sold almost as if they are share prices in a single stock. The NIFTY 50 effectively provides Indian investors with simpler ways of buying up NSE stocks. A piece published by Outlook explains that it does so in two ways. The first way of trading in the NIFTY 50 is to buy NIFTY 50 ETFs, which are essentially communal funds that track the NIFTY 50 (which itself tracks 50 stocks within the NSE) in different ways.
For example, the straightforward NIFTY 50 ETF tracks the total returns of the fund; the NIFTY 50 Equal Weight Total Return Index does the same, but in such a way that does not factor market cap into the weighted average of the index. The second way to invest in the NIFTY 50 is to buy into the fund like a mutual fund. This means investing an amount of your choosing and gaining or losing wealth propotional to your initial buy-in as the fund’s value shifts. Both of these methods simply require that the trader open a Demat account with a registered broker.
Global Stock Markets
To invest in the National Stock Exchange or to do so peripherally through the NIFTY 50, Indian traders need only open Demat accounts with reputable local brokers and set up their portfolios. The process is straightforward. Investing in other stock markets from around the world is more complicated, but it has become a more readily available option for Indian traders.
This is largely because of the growth of digital trading platforms that have given people access to MetaTrader 4, a well-known tool that facilitates investments in a variety of markets and asset classes all around the world. Accessing MetaTrader 4 through any of a number of apps or online services, Indians can specifically trade in global stock markets in two different ways.
The first way is to buy and sell CFDs relating to as many as 80 stocks from around the world. A CFD is a “contract for difference” established between a trader and broker. The trader buys the contract concerning a given stock or asset with the expectation that the asset’s value will move in a given direction. When the contract is at an end, the investment’s profit or loss will be determined by whether or not the asset moved as the trader predicted. This is essentially a method of stock trading in which shares are never actually purchased or sold.
The second way Indian investors can trade in global stock markets through the MT4 platform is to buy into indices. These function much like the NIFTY 50 in relation to the NSE, but on this platform there are indices that relate to other, international stock exchanges. Among the available options on the platform are the US30, UK100, and AUS200 indices, measuring movement by collections of stocks in the U.S., British, and Australian markets.
If you ultimately decide to invest in the NIFTY 50 or a global market, remember above all else that investing is a long-term process requiring ongoing attention and strategy. In this sense, it is not to be confused with day trading. As discussed in our previous piece, “Increase Your Salary With Clever Trading At The Same Time”, day trading typically concerns opening and closing a position on an asset within the same day. By contrast, investing can mean same-day transactions, but can also mean that an asset is held for days, weeks, or even months at a time.
For this reason, a great deal of analysis is required. To invest strategically in the NIFTY 50 or global markets, you will not simply be reacting to small fluctuations or recent trends. Rather, you will be assessing long-term patterns, monitoring relevant industry news, and keeping tabs on broader economic climates and indicators. It’s a complex process when done correctly, but with these markets and assets now easier to access, there are more opportunities than ever for Indians to invest successfully.