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How to Invest in US Stocks Through NSE IFSC?

  • Rudri Rawell
  • Mar 17 2022
  • 7 minutes
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Indian investors who aspired to easily invest in US stocks from India can finally rejoice as the NSE International Exchange (NSE IFSC), which is a subsidiary of NSE, will now offer the top 50 US stocks on its trading platform. This offering has started on March 3 at Gift City Gujarat, which is an international financial services centre. In this centre, various banks, stock exchanges, and other financial organisations carry out their global operations. 

To begin, eight stocks that include Google, Facebook, Apple, Netflix, are available to invest from March 3. 42 additional stocks will soon be made available on the platform as per reports from NSE. This investment mode has been established as per the RBI’s liberalised remittance scheme (LRS), under which resident Indians can transfer a maximum of $250,000 annually per person for purchasing stocks, properties, art, expenses towards medical treatment, etc. 

Here’s a look at what’s in store for investors looking to invest in US stocks through NSE IFSC.

What does it mean for retail investors?

Indian retail investors will now be able to invest or trade in stocks of listed US giants like Facebook, Apple, Google, Amazon, and others. These do not necessarily have to be listed in India, instead, these stocks can be bought or sold as unsponsored depository receipts. 

How does it work?

Earlier, investors in India who wanted to invest in US listed stocks had to make their investments via a broker registered in the US. However, under this new arrangement, the market makers who buy these stocks in the US will, in turn, issue them as receipts to Indian investors in India. These are the NSE IFSC receipts that can be used by investors to trade through registered brokers of NSE IFSC. 

Which stocks can be traded?

To date, a total of 8 US stocks have been added to the list of ‘available for trade on the exchange’. These include:

  1. Apple Inc (AAPL)
  2. Alphabet Inc (GOOGL), 
  3. Amazon Inc (AMZN), 
  4. Microsoft Corp (MSFT), 
  5. Meta Platforms (FB), 
  6. Netflix Inc (NFLX), 
  7. Tesla Inc (TSLA), and 
  8. Walmart Inc (WMT).

The total number of tradable US stocks will gradually be increased in phases. In all, stocks of about 50 of the largest US companies will be tradeable. Investors are awaiting the addition of some of the other top stocks like:

  • JP Morgan Chase, 
  • Berkshire Hathaway, 
  • Paypal, 
  • Mastercard, 
  • Morgan Stanley, 
  • Pepsico, 
  • Nike, 
  • Pfizer and 
  • Intel

How to invest?

Investors can follow the below-mentioned points to invest in US stocks through NSE IFSC:

  • Investors must open a Demat and trading account with an NSE IFSC registered broker. There are presently 36 registered brokers, and these include some of the large broking firms in the country. 
  • Investors must transfer funds from their domestic bank account to the broker’s account. After a successful transfer, investors can begin trading in the US stocks.
  • As per the liberalised remittance scheme (LRS) limits circulated by the Reserve Bank of India (RBI), investors can invest up to $2,50,000 per financial year in US stocks through this mode.

How to get ownership of US stocks in India?

By fetching the NSE IFSC receipts, investors can get ownership in a US company. This means the total number of receipts owned for a given company are equivalent to proportional ownership in the company.

NSE IFSC grants the receipts of such companies in a pre-determined ratio. Here are the share to receipt ratios:

  1. 1 stock of Tesla = 100 NSE IFSC receipts
  2. 1 stock of Alphabet = 200 NSE IFSC receipts
  3. 1 stock of Amazon = 200 NSE IFSC receipts
  4. 1 stock of Microsoft = 50 NSE IFSC receipts 
  5. 1 stock of Netflix = 50 NSE IFSC receipts
  6. 1 stock of Meta Platforms = 50 NSE IFSC receipts
  7. 1 stock of Apple = 25 NSE IFSC receipts 
  8. 1 stock of Walmart = 25 NSE IFSC receipts 

How do retail investors benefit from US stock investment through NSE IFSC?

The NSE IFSC platform offers Indian investors additional investment opportunities by allowing easy access to US stocks at a relatively lower cost and easy investment process.

Some of the benefits of the NSE IFSC platform are:

  • Option to invest in fractional units of stock.
  • Option of investing in select shares instead of exposure to a basket of stocks.
  • Investors can do intra-day trading to make the most of market volatility within trading hours.
  • Investors can hold the depository receipts in Demat accounts that are opened in GIFT City.
  • Investors are entitled to get corporate action benefits from the underlying stock investment.

What should investors know about taxation of US stock investments through NSE IFSC?

Any income earned by a resident Indian attracts income tax in India. Therefore, investors of foreign stocks who earn through dividends or capital gains must pay income tax towards the same. 

Foreign stocks that are held for over 24 months attract long-term capital gains tax. Any long-term capital gains made from the sale of such shares are taxable at 20% plus surcharge and cess. If such foreign stock is held for a maximum of 24 months, gains from these are considered as ‘short term capital gain’ and taxed as per individual income tax slab.

Other factors to note about the NSE IFSC platform

  • Investment in depository receipts are subject to risks like exchange rate, settlement, price, and liquidity risks.
  • The investor has to make a security selection, regularly monitor the portfolio, re-balance the portfolio, etc. basis personal investment goals. This could mean substantially higher risk for those who are new to the stock markets.
  • Re-balancing through sale could attract brokerage or transaction charges and income outflow through tax.

Conclusion

The NSE IFSC has now made it far easier for Indian investors to gain exposure to the US markets through its platform. Indian investors can make the most of this platform to invest in some of the best US stocks, especially the US tech giants.

FAQs

Should I invest in US listed stocks through NSE IFSC or mutual funds?

The NSE IFSC platform is considered to be a better alternative for investing in US-listed stocks since most international mutual funds are currently not accepting new inflows as per Securities and Exchange Board of India guidelines. Additionally, the NSE route allows investors to independently make stock selection, as against, mutual funds that do not allow such an option.

Can I do intraday trading in US stocks through NSE IFSC?

Yes, NSE IFSC route allows investors to do intraday trading in US stocks to maximise profits via daily price movements.

Is it legal to invest in US stocks from India?

Yes, it is legal to invest in US stocks from India, either through the NSE IFSC route or by investing in mutual funds that offer international exposure.

How can I invest in stocks?

To begin investing in stocks, you need to have a trading and Demat account apart from a bank account. The trading and Demat accounts can be opened by approaching a registered broker.

Are US stock investments riskier than Indian stocks?

US stock investments may carry higher risk than Indian stocks due to currency or exchange rate movements, global economic conditions, political scenarios, etc.

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