Indian HNIs cash in on Tesla stock's gains through LRS route1 min read . Updated: 08 Jan 2021, 12:36 PM IST
- Indians are permitted to invest up to $250,000 per year in foreign equities under the RBI’s Liberalised Remittance Scheme
A record 8% jump in Tesla Inc's stock price on Nasdaq and its 8.32 times rise in the past one year led to hefty gains for Indians who have invested in the shares. Indians are permitted to invest up to $250,000 per year in foreign equities under the RBI’s Liberalised Remittance Scheme (LRS).
According to Sitashwa Srivastava, CEO, Stockal, a fintech which enables global investing for Indians, clients of the platform from India have $30-35 million parked in the stock.
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“Tesla is the most frequently traded stock on Stockal and occupies a 10-25% weight in client portfolios. On an average clients have made returns of 75-120% on the stock," said Srivastava.
"Overall 9% of individuals that have opened Vested accounts invest in Tesla. Even during times of high volatility such as the 60% drop in March 2020 or the 34% drop near the share split, the percentage investors investing in Tesla stayed the same showing the strong belief they have in the company," said Viram Shah, CEO, Vested Finance, a global investing platform.
However Vikas Gupta, founder, Omniscience Capital, a Sebi Registered Investment Advisor (RIA), which also advises on foreign stocks, investors should exercise caution. “Tesla is a great product in a not-so-great company with an overleveraged balance sheet. I do not recommend it to my clients. If investors are convinced of the Electric Vehicle (EV) theme, buy a basket of stocks around it to reduce risk. Alternatively, by an exchange traded fund (ETF) if you can be patient and do an SIP," he said.
Indian investors can invest in ETFs, traded in the US, through the LRS route. Alternatively, there are ETFs or index funds trading in India which track US indices such as the Motilal Oswal Nasdaq ETF. The NASDAQ ETF launched in 2011 has delivered a return of 24.7% CAGR since inception. It is up 45% in the past year.
“Yes, some investors have gotten lucky. But its a bit like crossing a highway. You can either run across it and risk an accident or take the long route to the nearest overbridge," Gupta added.
The steep rise in the shares of the company propelled its founder Elon Musk to the position of the world's richest person, overtaking Jeff Bezos of Amazon.