An Overview – NASDAQ Trading From India

One of the world’s largest and oldest stock exchanges, the NASDAQ conducts all of its business electronically rather than on a physical trading floor. By market cap of its listed companies, the NASDAQ is the 2nd largest stock exchange in the world.

The NASDAQ was a leader in online operations when it initially opened its doors in 1971, offering a listing service for companies that had previously been traded OTC. It immediately drew several innovative and new high-tech companies, including Amazon and Apple.

The NASDAQ now plays a vital role in markets and the economy, with its two primary indexes — the NASDAQ 100 and the NASDAQ Composite — serving as business barometers. To help you understand it all, here’s everything you need to know about the NASDAQ, from how it works to smart investment methods.

How Does The NASDAQ Operate?

The New York Stock Exchange (NYSE) is an example of an auction market, while the NASDAQ is a dealer market. In a dealer market, both sellers and buyers trade with a market maker in a particular stock or securities. 

This is in contrast to an auction market, such as the NASDAQ, in which sellers and buyers trade directly with each other through a broker. Companies that are traded on the NASDAQ represent a diverse range of fields, sometimes known as sectors. 

The shares traded on the NASDAQ are focused more on growth and include fewer blue-chip companies than those traded on the NYSE. This is even though the NASDAQ is home to some significant companies, like PayPal, PepsiCo, and Amazon. The disruption, innovation, and volatility of Nasdaq shares are well-known characteristics.

Primary Indexes On The NASDAQ

NASDAQ is more than simply a stock exchange. It also offers two highly recognized indices that follow Nasdaq stock performance daily:

• The NASDAQ 100 Index is a smaller index that focuses on the top 100 businesses traded on the Nasdaq. Six out of every ten of them operate in technology.
• The NASDAQ Composite Index measures most of the securities traded on the NASDAQ market, excluding preferred stocks, mutual funds, and derivatives. The NASDAQ is strongly weighted with technology firms, making it a leading indicator for the industry.

The NASDAQ Composite is the most significant of the two. While the composite index is the most generally followed, traders and investors interested in options, futures and exchange-traded funds pay more attention to the NASDAQ 100.

Calculating The Daily Average Of The NASDAQ Indices

Both the NASDAQ 100 and the NASDAQ Composite employ the identical modified market capitalization weighting strategy. This method calculates the market capitalization of a stock by multiplying its closing price by the total number of currently outstanding shares for that particular company. The NASDAQ Composite is the more significant of the two. When analysts say “the NASDAQ closed up five points,” they usually mean “the Composite.”

Share weights are derived by dividing the market capitalization of each security by the total capitalization of all index securities. The share weights for each stock are then multiplied by that stock’s closing price, and the total is divided by an index divisor that takes into account market changes such as mergers, stock splits and other moves. The resulting average is the NASDAQ for that day.

NASDAQ indices’ Performance

NASDAQ stocks have historically outperformed the larger stock market. Its indexes, particularly the Nasdaq 100, have traditionally outpaced the Dow Jones Industrial Average (the 30 biggest US businesses) and the S&P 500 (which monitors large-cap corporations), two other benchmarks for the stock market as a whole. 

In the five years to July 2022, the Dow gained around 46% and the S&P 500 gained almost 60%, respectively. During the same time span, the NASDAQ Composite rose 88%, while the NASDAQ 100 rose 113%.

What is the explanation? Both NASDAQ indexes are disproportionately weighted toward consumer services, technology and health care, all of which have outperformed in recent years. 

However, keep in mind that NASDAQ equities are also more volatile. This implies that during market downturns, they might collapse considerably quicker and harder. That occurred in the first half of 2022, when the NASDAQ 100 and NASDAQ Composite led the way down as US stocks entered a bear market.

How To Invest In NASDAQ From India

You’ve come to the right place if you’re wondering how to invest in NASDAQ from India. There are two methods to do NASDAQ trading from India:

• Direct Investments: The Stockal app allows you to invest directly in NASDAQ equities. Its zero-cost approach enables customers to begin trading immediately without incurring any account opening fees or commissions on purchases and sales. Opening a US stocks account with Stockal takes less than 3 minutes. Find out more here.
• Indirect Investments: There are two ways to invest in the NASDAQ indirectly. You may put your money into mutual funds that track the NASDAQ index. Exchange-traded Funds are another way to acquire exposure to NASDAQ equities. NASDAQ ETFs may be purchased with the Stockal app.

How To Invest In NASDAQ From India Using An ETF

ETFs are one of the cheapest options to invest in NASDAQ stocks from India. An ETF is a grouping of many equities that are traded as a fund. They are comparable to mutual funds. The distinction is that they are passive funds, which means that the underlying equities follow an index.

One can begin NASDAQ trading from India by purchasing ETFs that are accessible in India. You may also use the Stockal app to invest in NASDAQ ETFs to spread your risk while profiting from US stock market gains. You may choose from a large choice of ETFs with Stockal. You may also choose an ETF depending on the size of its stocks based on your risk tolerance and expected return. However, the mutual fund method is presently unavailable since these funds have achieved the RBI’s maximum limit. Under the Liberalised Remittance Scheme, the Reserve Bank of India has set a maximum of $2,50,000 per year, thus you may invest up to this amount without limitation.

Advantages Of Investing In NASDAQ Stocks

A developed nation, such as the United States, provides several advantages. Aside from the fact that the United States has the world’s largest GDP, close to $21.44 trillion, there are numerous additional advantages to investing in NASDAQ stocks.

• Diversity: Companies from all over the globe are listed at NASDAQ, making it an appealing investment location. When you invest on the US Stock Exchange, you are not only investing in worldwide firms, but you are also diversifying your financial portfolio. A national emergency might lower the index. However, the impact would be minimal. In contrast, Indian firms dominate Indian indices. Even slight unrest in the nation might lead the indices to fall. The US stock market is varied, and it has proved to be robust in the face of adversity. However, in the case of India, this is not the case.

• The Dollar Value: Historical data show that the Indian rupee has been falling versus the US dollar, and this trend is likely to continue. The rupee-to-dollar exchange rate influences the earnings you make from foreign shares. If dollar-denominated assets such as US shares rise in value, any rupee depreciation helps to boost earnings. Even if global markets underperform or stay steady, you win if the rupee falls against the dollar.

• R&D And Innovation: The United States is home to Silicon Valley, which generates new ideas on a daily basis. New firms and startups with innovative products arise on a regular basis, catching the attention of prospective investors. The US stock market also provides several chances to invest in innovative next-generation technology such as machine learning, artificial intelligence and biopharma. An investor might select any fresh firm that piques their attention or go for the big fish in the market. Companies like Amazon and Meta may have begun as youthful experiments in garages, but keep an eye out for them since you never know what chance you could miss.

• Focus On Growth Stocks: Investing in NASDAQ stock gives you access to some of the best global tech firms. Buying shares in these organisations is easy and almost equivalent to buying shares in Indian enterprises on Indian stock exchanges. What distinguishes it is that the transaction is conducted via an international brokerage firm, and as an investor, you must adhere to the RBI’s foreign currency restrictions.

Risks Of Investing In NASDAQ Stocks

Investing in US equities, like any other investment, entails risks. Let’s take a look at these risks:

• Country-Specific Risks: Predicting the social, economic and environmental elements that affect another nation is difficult. A new trade or policy agreement announcement, for example, might have an impact on your investment. It is preferable to be informed of such happenings or even better, to have a US Advisor on your side.

• High Volatility: The US stock market is projected to be volatile in 2022 and is currently in rough seas. The US Federal Reserve’s statement on coming monetary tightening has provided growth stock investors with a sharp reality check. They are now realising that any price may not be the best price for high-growth stocks, particularly when such firms are not expanding.

• Regulatory Concerns: The government regulates many areas of the US economy. Regulatory changes might therefore directly influence the industry and, as a result, your investment. Keep an eye out for news on the firms you’ve invested in if you’re doing your own investment.

• Concentrated Majorly on Tech: It is no secret that the NASDAQ is heavily favoured in tech stocks. Rising interest rates and inflation are debilitating for the tech firms in such circumstances. This might have an immediate effect on your investment. As a result, be sure you understand the firm you’re investing in.

Wrapping Up

The NASDAQ was the first electronic stock exchange, making history. As the world’s second-largest main stock exchange, it now represents market activity in high-growth firms and technology. Those investing in these securities forms closely monitor the NASDAQ and its indexes. NASDAQ indexes beat rivals when growth stocks are weighted. And investing in NASDAQ-tracking mutual funds or ETFs provides investors with a straightforward, efficient approach to profit while assuming less risk.

If you are ready to take the first step, establish an account with Stockal, which provides a SIMPLE, SMART and SECURE investing and trading platform. Stockal is one of the best apps for US stock markets investing and trading from India, and provides SIPC protection of up to $5,000,000. Choose an intelligent friend to accompany you on your quest to invest in NASDAQ stocks. Visit Stockal’s website for further information on how to invest in NASDAQ from India.