ICICI Direct, a brokerage firm, is trying to cash in on the U.S. presidential polls by offering its clients a facility to bet on the impact of the outcome on the U.S. market.
Investors can trade in the futures contracts of Dow Jones and S&P 500 – the two leading indices in the U.S. – through ICICI Direct.
“With U.S. presidential elections coming closer and the Federal Reserve rate hike expected in December, there is some interest among professional traders in participating in such events,” Vishal Gulecha, Executive Vice President, ICICI Securities told The Hindu.
“The bigger interest though, of investors and traders, is how they can hedge their domestic cash portfolio and derivative trades in Indian markets against any unexpected reaction in the global markets due to the presidential elections.”
Rupee-denominatedInvestors can use this facility to trade in the U.S. contracts during Indian time. The contracts are rupee-denominated. During the last six presidential polls in the US, there had been an average movement of 5.7 per cent in the Dow Jones index in the one month post the election results.
The U.S. election day is on November 8 and the equity markets across the globe are showing signs of nervousness leading to massive sell-offs.
Interestingly, some of the other leading brokerages like IIFL, Kotak Securities and Edelweiss had also launched overseas trading services similar to ICICI Direct few years ago, but have mostly shut them down due to lack of investor interest.
“Historically, an emerging market like India has given better returns than that of developed markets like the U.S.,” said an official of a large brokerage that had launched an overseas trading facility earlier.
“We didn’t see much traction in the service as domestic investors found more opportunities in India itself. So that service was was discontinued.”
Global employeesICICI Direct said that its overseas platform offers opportunities in stocks across global exchanges and the participation is primarily from ultra-HNIs (high net worth individuals) who are looking at portfolio diversification and employees of multi-national corporations who get stock options.
The brokerage, however, has cautioned investors that trading in Dow Jones futures was not advisable for retail investors and even seasoned traders must be careful as bid-ask spreads are very high. “Retail investors look for the impact it could have on their domestic portfolios and they are keen to know ways in which they can manage their risk.
“We recently organised an investor conference call on hedging and saw overwhelming participation,” Mr. Gulecha said.
