Just like the S&P 500, the NASDAQ100 can also help you diversify your geographic investment risk outside of the Indian market and into American stock indices and globally, to some extent. In general, diversification objectives are best achieved when you invest in assets (stock indexes in our case) whose movements are uncoordinated. That’s the way it is for the Sensex and S&P 500. The performance of the Sensex and Nasdaq 100 calendar years differed greatly from each other in most years. When one index has performed very well, the other has not done so well or has ended the year down. By investing in the Nasdaq 100 index, apart from staying invested in the Sensex, you can reduce the risk from investing purely in the Indian equity market. Additionally, if you need excellent brokers that trade in NAS100, you can go to http://www.cnie.org/forex/nas100-brokers.html immediately.
Furthermore, just like the S&P 500 (or any other American stock index), investing in the Nasdaq 100 also gives you a rupee depreciation advantage. Currently, the Nasdaq 100 is trading at a twelve-month P / E nearly 27 times (Bloomberg). This is higher than the 10-year average 22 times and is at the top end of its historical range of 15 – 28 times from Dec-09 to Dec-19. With a rating above average, investors can invest in this index on a staggered basis.
The S&P 500, on the other hand, is trading at 19.3 times (Bloomberg), close to its historical average. Though note, historically, the Nasdaq 100 has been trading at a more expensive valuation than the S&P 500 given the large percentage of high-growth tech stocks in it, which also has a lot of buzz around it.
If you want global diversification with higher potential long-term returns and lower volatility, then you might consider incorporating 10-20% of your equity allocation into the S&P 500. However, if you want to target higher returns (better than the S&P 500) and are ready to take on higher volatility, then you can consider investing 10-20% of your equity allocation in the Nasdaq 100. Whichever index you choose, we recommend that you organize this investment in stages over the next 3-6 months.