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Should I stay invested in losing NASDAQ stocks or switch to Indian Mutual Funds?

Ramalingam Kalirajan |8182 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Apr 01, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Apr 01, 2025Hindi

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Is it good to stay invested or exit with a loss and invest in Indian Mutual Funds? I have stocks acquired through RSUs and ESPP from my company, which is listed on NASDAQ. The current market value is around 50 lakh, with a loss of approximately 10 lakh from the vested/purchase price, currently the stock is 50% down from 52weeks peak. It is a top US-based semiconductor company. I am worried about the current global situation. I have long term investment plan. Please suggest

Ans: You have built a significant investment in your company’s stock through RSUs and ESPP, now valued at Rs 50 lakh, but currently at a 10 lakh unrealized loss due to a 50% drop from its 52-week peak. Given the global market uncertainty, it’s natural to question whether you should hold or exit and reinvest in Indian mutual funds. Let’s analyze your situation from multiple angles.

Key Factors to Consider Before Exiting
1. Industry Outlook: Semiconductor Sector
The semiconductor industry is cyclical but has long-term growth potential due to AI, cloud computing, and 5G expansion.

If your company is fundamentally strong, the stock may recover once global conditions stabilize.

However, semiconductor stocks can be volatile, and a recovery could take time.

2. Risk of Holding Too Much in a Single Stock
Your entire Rs 50 lakh exposure is concentrated in one stock.

If your company underperforms or faces industry-specific challenges, your portfolio could suffer more losses.

Diversification is critical, and shifting to mutual funds reduces company-specific risk.

3. US Market vs. Indian Market
Global Uncertainty: The US market faces recession risks, geopolitical tensions, and interest rate fluctuations.

Growth Potential: Indian markets are currently more stable with a strong domestic growth story.

Currency Risk: If the rupee appreciates against the dollar, your US holdings may lose additional value in INR terms.

4. Tax Implications on Selling US Stocks
US Taxation: If you sell RSUs, you may owe capital gains tax in the US. ESPP shares may also have tax implications.

Indian Taxation: If you sell US stocks, gains will be taxed in India as per foreign stock capital gains rules.

Tax Planning Required: You should check the tax efficiency before selling everything at once.

Should You Exit or Stay Invested?
Since you have a long-term investment plan, an immediate full exit may not be the best approach. Here’s a better strategy:

1. Partial Exit Strategy for Risk Reduction
Instead of exiting at a loss completely, sell a portion of your holdings (e.g., 30-50%) to reduce concentration risk.

Redeploy funds into Indian equity mutual funds for better diversification and stability.

Keep some exposure to the stock for potential recovery, but avoid having 100% dependency on a single US company.

2. Redeploying into Indian Mutual Funds
If you decide to shift funds from US stocks to Indian investments, consider:

Flexi-cap Mutual Funds → Diversification across large, mid, and small caps.

Mid-cap & Small-cap Funds → Higher growth potential, but with volatility.

Balanced Advantage Funds → Adjust automatically between equity and debt for stability.

Since you have a long-term investment horizon, mutual funds offer better diversification and risk-adjusted returns than holding a single US stock.

Final Insights
Your company’s stock has long-term potential, but the current risk is high due to market uncertainty.

Don’t panic-sell everything at a loss. Instead, reduce exposure gradually to avoid further downside risk.

Indian equity mutual funds provide better diversification and align well with your long-term goals.

Tax implications should be carefully planned before exiting your US investments.

A step-by-step shift into Indian mutual funds while keeping a portion in US stocks may be the best-balanced approach.

Best Regards,

K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.