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You can now own your favorite companies such as Amazon and Netflix! Yes, you heard it right! Indian investors like you and me can now invest in US stocks with the ease of sitting in our homes. In this article, we will discuss everything you need to know about investing in US stocks through NSE IFSC!
About NSE IFSC
National Stock Exchange of India Limited (NSE) got approval from SEBI to form an International Financial Service Centre (IFSC) in the Gujarat International Finance Tech City (GIFT).
Soon after, in November 2016 NSE IFSC Limited (NSE International Exchange) was incorporated. It is a fully owned subsidiary company of NSE.
NSE IFSC offers trading in various products including index derivatives, stock derivatives, currency derivatives, commodities, debt securities, and now US stocks through NSE IFSC receipt.
What is the NSE IFSC Receipt?
An NSE IFSC Receipt is a negotiable financial instrument in the form of an unsponsored ‘depositary receipt’. An unsponsored depositary receipt is issued by a depositary bank without the involvement, participation, or consent of the foreign company.
This provides the investor with an option to trade in fractional quantities when compared to the underlying securities traded in the US markets.
The holder of the NSE IFSC Receipt holds the legal title to the Receipt and has a beneficial interest in the Underlying Share.
For now, The NSE IFSC Receipts are issued by HDFC Bank IBU, in its capacity as the NSE IFSC Receipts’ sole Custodian.
Can these receipts be converted into shares?
An investor can request the conversion of NSE IFSC Receipts into the underlying share if the NSE IFSC Receipts held by such an investor represent a whole number of Underlying Shares.
The investor may submit a Cancellation Request to take delivery of the Underlying Shares in the US brokerage account.
Who can invest in US stocks through NSE IFSC?
The following is the categorization made by NSE IFSC:
- A person resident outside India
- Non-resident Indians
- An individual resident in India who is eligible under FEMA to invest funds offshore, to the extent allowed in the Liberalised Remittance Scheme of RBI.
Why should you invest in Foreign stocks?
Over the years, US technology stocks have given phenomenal returns to their investors. Some of them are the names that we use on a daily basis. Also, these stocks make it to the list of the world’s best stocks.
Through investing in international stocks, an investor will be able to geographically diversify their portfolio which offers stability. Developed markets are considered less volatile than developing markets.
Apart from that, an investor is also exposed to currency fluctuations in foreign markets. In the case of currency appreciation, the investor’s portfolio will get an additional boost and vice versa.
Steps to Invest in US stocks through NSE IFSC
To invest in US Stocks you just need to follow these 3 simple steps:
- Investors will need to open a trading and Demat account with NSE IFSC registered brokers.
- Next investors will be required to add funds. They can use their local bank account for NSE IFSC registered brokers’ bank accounts.
- Once your account is funded, you can start trading in US Stocks.
Tax Implications
Any return generated from the Indian stock market is taxable for the trader or investors. Similarly, trading in US Stocks has certain taxability which is categorized in the following way:
Taxable Events:
- Conversion of US underlying shares into IFSC receipts
- Requested for Cancellation of IFSC receipts into US underlying stocks
- Distributions of dividends in cash by U.S. corporations
- Sale of IFSC Receipts
Non-taxable:
- Purchase of NSE IFSC Receipts
List of US Stocks on NSE IFSC
| Stock | Market Cap (In Trillion) | CMP (In USD) |
|---|---|---|
| Apple Inc | 2.62 | 163.62 |
| Microsoft Corporation | 1.99 | 268.09 |
| Alphabet Inc | 1.44 | 110.34 |
| Amazon.com, Inc. | 1.33 | 130.75 |
| Tesla Inc | 0.90 | 288.09 |
| Meta Platforms Inc | 0.43 | 161.78 |
| Walmart Inc | 0.36 | 131.60 |
| Netflix Inc | 0.099 | 223.28 |
Key differences between investing in Indian stocks VS US stocks
| Basis | Indian Stocks | US Stocks |
|---|---|---|
| Exchanges | Investors can trade through NSE or BSE | Investors can trade only through NSE IFSC. |
| Timing | Trading in Indian stocks will be open from 9.15 a.m. to 3.30 p.m. | Trading in US stocks will be open from 7 p.m. to 1.30 a.m.. |
| Fractional Investing | An investor or trader has to buy a full share. No fractional investing is allowed. | An investor or trader has the option of owning a fraction of the tota; shares. |
| Settlement | T+2 days settlemen | T+3 day settlement |
| Currency of trading | Indian Rupees (INR) | US Dollar |
| Cap on Investment amount | There is no minimum or maximum cap for investing in Indian stocks. | RBI’s Liberalised Remittance Scheme or LRS limits the transaction up to $250,000 per year. |
| Charges | The charges differ from broker to broker and also on the time duration of holding the stocks. | IFSC will charge 12 cents for every $100 or 0.12% |
In closing
In this article, we looked at everything that you should know about investing in US stocks through NSE IFSC. It has started with the 8 biggest stocks and has plans to eventually add up to 50 more stocks.
That’s all for this post. Happy Investing! Which US Stock do you want in your portfolio? Let us know in the comments below.
You can now get the latest updates in the stock market on Trade Brains News and you can even use our Trade Brains Portal for fundamental analysis of your favourite stocks.
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Image and article originally from tradebrains.in. Read the original article here.