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Let us first get to know the Indian stock market in brief before we dive into how you can invest in it.
India’s two main stock exchanges are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). BSE is the oldest stock exchange established in 1875, while NSE, established in 1992, is India’s largest stock in terms of volume. nse provides more liquidity than bse despite having fewer listings than bse. The market capitalization of NSE is approximately $2.27 trillion and BSE is $2.1 trillion. bse’s sensex index has 30 companies, while nse’s nifty index has 50 companies.
all stock exchanges in india are regulated by the securities and exchange board of india (sebi).
invest in united states indian stocks
The most common choice among investors includes investing in India-focused mutual funds in the US, exchange-traded funds (ETFs) and exchange-traded notes (ETNs) based on Indian shares or US or global depositary receipts. (adrs or gdrs).
to access the indian stock market from the usa. In the US, you will need to open an account with a US-regulated international brokerage firm. uu. Securities and Exchange Commission (SEC) or open an account with an Indian Stock Broker registered with SEBI.
You can open an account with any well-known Indian brokerage firm, such as zerodha, sharekhan, motilal oswal, after providing the prerequisites to start trading in the Indian stock market.
International brokers like interactive brokers that have a presence on the nse allow you to trade Indian stocks, options, futures and indices. You can open a brokerage account to start buying and selling stocks directly from the Indian stock exchange.
Non-Resident Indians as well as Resident Indians have the opportunity to open specific accounts with such brokers. Through these accounts, Indian investors can also access nse shares based on their location.
Fidelity Investments or Charles Schwab are other brokerage firms that also offer trading services. you will need to pay additional commissions and currency conversion costs. Since shares are traded in Indian currency, please be aware of exchange rates. Compare the major money transfer companies before you send your money to India to get the best exchange rate and save on transfer fees.
invest in adrs or gdrs
You may already have access to Indian stocks via American Depository Receipts (ADRS) or Global Depository Receipts (GDRs) through your brokerage firm. ADRs are listed on the New York Stock Exchange (NYSE) and the Nasdaq Stock Exchange. while gdrs is listed on the london stock exchange (lse).
Some of the listed companies in India have their shares listed on the US and UK stock exchanges through their depository receipts. ADRs are negotiable certificates issued by a US bank that represent a specific number of shares of a foreign company that are traded in the United States. stock market.
these indices are made up of indian stocks and are already listed on the nyse and nasdaq. Some popular India-focused ETFs are:
- ishares msci india etf (inda)
- wisdomtree india earnings etf (ixse)
- franklin ftse india etf (flin), etc.
and a popular etn includes ipath msci india etn (inptf). These are good investment options for foreign investors.
You can buy these ETFs from independent brokers like Interactive Brokers, td ameritrade for a very low commission.
online trading platforms:
stocks can be traded in 3 different ways: desktop, web and mobile app. the desktop based platform is the fastest trading platform among the three trading platforms. one needs to install the software on the desktop/laptop after downloading it from the broker’s website. while for the web-based platform, the login page can be accessed through web browsers like firefox or chrome. nowadays, there is an app for almost everything. Most of the major stockbrokers now have android and ios apps for trading services.
Currently, trading access to the Indian financial markets is only available to NRIs and FIIS (Intermediary Financial Institutions).
Below are some of the most popular online trading platforms:
interactive brokers (ib) is an international online broker headquartered in the usa. uu. it is considered the top choice among professional stock traders, primarily due to its institutional-grade desktop trading platform and low margin rates.
ib’s web platform, its premier trader workstation (tws), is one of the best trading platforms in the industry. ib also offers mobile trading apps for android and ios mobile devices.
Its $0 transactions and user-friendly web platform can also attract casual investors. one of the main advantages of ib is that investors have access to a wide range of global markets, products and research tools. It is regulated globally by several top-tier financial authorities, such as the US. uu. SEC and the UK Financial Authority (FCA).
nris has commercial access in nse through the subsidiary ib-india. At this time, only Futures and Futures Options trading is available through the F&O segment. stock trading is not yet available. also, fii is currently not supported.
nse exchanges cost a low flat fee of 20 rs per order for stocks, futures and options. There is no minimum deposit required by IB. The price of NRI includes a minimum of $500 (INR equivalent) for a market data and research subscription for shares and derivatives listed on NSE and minimum brokerage fees of Rs 600 per month for NSE trading accounts and $10 for trading accounts. abroad.
zerodha is the largest online discount broker in india by active customer base, market volume and new customer acquisition. It is regulated by SEBI. Known for its lowest brokerage fees for futures and options, commodity trading, stocks, mutual funds, and bonds, it also offers highly advanced trading tools.
direct mutual fund and stock investments (nse, bse) come with no fees. and a fixed Rs 20 or 0.03% on intraday trades in stock, forex and commodity trades.
zerodha offers a range of in-house platforms for online and panel trading, such as kite (web-based), kite mobile (mobile trading application), currencies, console, etc., and various partner products such as smallcase, streak, and more. it is suitable for all types of traders: active and passive traders, beginner traders and algorithmic traders.
NRIS can invest in the equity and mutual fund segment, but they are not allowed to trade in the forex or commodity markets in india. brokerage fees are Rs100 per order for futures and options and Rs200 or 0.1% per executed order for stocks.
With over 2 million clients, Sharekhan is one of India’s leading full service brokers. Full-service brokers provide investment advice, stock recommendations, research reports, trading advice, trading training, and a relationship manager in addition to buying and selling stocks.
investors can choose from a wide range of products and services, such as stocks, mutual funds, forex, derivatives, portfolio management services (pms), initial public offerings, stock quotes, stock market news alerts, values etc also offers free online seminars/workshops for investors. also offers nris services.
sharekhan trading platforms include trade tiger, sharekhan.com, sharekhanmobile, commobile pro, instamf app. trade tiger comes in two versions: trade tiger basic for casual traders and trade tiger advanced for professional traders.
Full-service brokers typically charge a percentage (0.1-0.5%) of the transaction value as brokerage, so the total brokerage is high if your investment amount is huge.
robinhood is an online discount broker that allows investors to trade stocks, options, ETFs, and cryptocurrencies with no commissions or fees. Currently, it is one of the few brokers that offers cryptocurrency trading.
Attracts active traders looking to trade commission-free and beginning traders. Investors can trade on the web-based portal or use their mobile trading app.
If you are interested in buying US Indian stocks. In the US, you can buy shares of Indian companies listed in the US. uu. bag. robinhood offers options trading and access to over 650 global stocks via american depository receipts (adrs).
taxes on investment in Indian shares
Income from the sale of equity shares comes under ‘Capital Gains’: when the shares are sold at a higher price than the purchase price.
Short-Term Capital Gains Tax: If you sell any stock listed on a stock exchange within 1 year of purchase, the gains are taxed at 15%.
Long-term capital gains tax: Tax is exempt on gains made on shares held for more than 1 year. however, if the long-term capital gain is more than Rs 1 lakh, a 10% tax is levied. the benefit of indexing is also not available to the seller.
F&O Income Tax: Treated as a business income, it will be taxed as per slab tax rates in India.
securities transaction tax (stt)
stt is a direct tax that applies to the purchase and sale of securities listed on recognized stock exchanges (not to commodity or foreign exchange transactions). different stt rates apply for stock, futures and options trades.
For raw materials, the raw material transaction tax (ctt) is applied.
Besides stt, there will be additional charges, exchange charges, statutory tax and service tax.
read more about tax and capital gains management in india.
Can foreigners invest in Indian stocks?
For now, foreign individuals cannot invest directly in the Indian stock market. although individuals with a high net worth (at least $50 million) can register with SEBI as a Foreign Institutional Investor (FII).
portfolio investment scheme (pis)
the reserve bank of india developed a scheme called portfolio investment scheme (pis) which grants non-resident indians (nris), persons of indian origin (pios) and foreign institutional investors (fiis) permission to trade in the primary and secondary capital markets in india.
under pis, fiis and nris can buy shares or bonds of companies listed on the indian stock exchange on repatriation basis. the pis account allows investors to trade solely in the equity segment.
according to the pis, eligible entities can open an external non-resident bank account-nre or ordinary non-resident-nro to be able to operate.
nre/nro is a rupee account. the main difference between these accounts is that nre is repatriatable and nro is not repatriable. This means that you can send your money in the nre account to your country of residence, while the money in the nro account cannot be repatriated beyond $1 million per year.
You will then be required to open a demat account (to store your securities electronically) and a merchant account. Before opening a trading and demat account, obtain a letter of permission from the RB. only then you will be able to open the trading and demat account with a sebi regulated brokerage firm of your choice by linking your bank account nre or nro.
You must present a permanent account number (PAN) card (for tax purposes) along with the necessary documents for identity verification.
Note that only one account (either account nre or nro) should be associated with a trading account and a demat account.
Furthermore, the Indian government has placed a certain limit on investments. For example, the total investment for FIS must not exceed 24 per cent of the paid-up capital of the Indian company (this 24 per cent can be raised to the sector limit after obtaining the approval of the company’s board and shareholders) and 10 per cent percent for nris/pios (can be increased to 24 percent after board approval)
investment scheme without portfolio (non-pis)
a no pi account is an ordinary nri savings account opened at any bank in india. the transaction with an account other than pi is not reported to rbi. With respect to investments, the nro non-pis account can be used to invest in stocks, equities, ipos, mutual funds and bonds without repatriation.
how to manage your investments from abroad as nri?
- appoint a mandate holder to manage your nr/nr accounts. You need to provide “Appointment of Mandate Holder” application to your bank with required documents and sample of mandate holder’s signature
- Appoint a Power of Attorney (POA) in India to track and manage your investments
- most brokers have online trading facilities. once you meet the required compliance and know your customer guidelines (kyc), you can start trading on online platforms.
As an NRI, you must complete a Foreign Account Tax Compliance Act (FATCA) declaration before opening your trading account and so on.
Please note that NRIS cannot trade certain Indian stocks. Please verify this information carefully with your brokers to avoid penalties.
India is one of the world’s leading emerging markets, with ever-increasing foreign investment over the years. If you are looking to diversify your investment portfolio through investing in foreign stocks, investing in the Indian stock market could be a smart move.