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Investing in foreign stocks from India has several advantages. Along with portfolio diversification, Indian investors benefit from exposure to a global market, MNCs, and exchange rate differences.
Portfolio diversification
Investing solely in the Indian stock markets makes a stock portfolio vulnerable to internal turbulence. The turbulence can stem from political or socio-economic factors. Hence, diversification is crucial to minimize concentrated risk. and maximize returns during grim domestic market conditions.
Exchange rate
The current geopolitical and economic conditions have caused the rupee to depreciate against the dollar. The rupee-dollar exchange greatly influences the returns generated from investing in international stock markets. If the rupee depreciates, the value of returns generated from foreign stocks appreciates and vice versa. Hence, Indian investors can gain from a strong US dollar while trading in foreign shares.
Fractional investing
Indian investors with limited funds can invest in pricey shares like Amazon or Apple with fractional investing. In this method, a company’s stock is split or fractionate into several smaller parts. An investor can invest in these fractions and gain from its appreciation. Hence, Indian investors can build a profitable portfolio over time with fractional investing. However, this kind of investing forecast stock price is available on the websites of different forecasters. You as an investor visit and find the best stock price for yourself.
How to trade foreign stocks from India?
Domestic broker and foreign brokers
Trading in foreign stocks can be done from India through a domestic or a foreign broker. An investor needs to open a trading account with a domestic broker having tie-ups with a foreign broker. Likewise, a trading account with a foreign broker with services offer in India is required. Direct and indirect investing and intraday trading in the US market from India, are options available through brokers. Based on the broker, the rules on investment instruments or restrictions on the number of trades can be applicable.
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Stock exchanges
Stock exchanges like NSE and BSE have launched dedicated platforms for trading foreign stocks. These stock exchanges use different models. For instance, BSE facilitates direct trading via its partnership with many international stock exchanges. NSE’s IFSC platform currently only facilitates trading in the US market. Investors can trade in 50 top US stocks from India like Amazon and Tesla with depository receipts (DR).
Mutual funds and ETFs
Both domestic mutual funds that invest in foreign stocks or international mutual funds are options available to Indian investors. Investors can purchase an international ETF directly or invest in a domestic ETF that tracks international indices like S&P 500 or Dow 30.
The low-ticket size requirement makes this route suitable for beginners. Moreover, investors with limited knowledge about global markets can diversify their portfolios by leveraging such professionally managed international funds.
Online Platforms
Many new-age online platforms and free automated trading apps have simplified the process of investing in foreign stocks. An Investor can open an overseas trading account and complete the KYC requirements digitally. Similar to trading in domestic shares, investors can trade in US stocks from India or other global markets. However, rules for intraday trading could differ between different apps.
The Liberalized remittance schemes
Foreign investment in stocks is governed by the RBI’s liberalized remittance scheme. As per this scheme, an Indian investor is permitted to remit up to two lakh fifty thousand dollars per financial year. This amount can be freely used to invest in stocks, bonds, etc.
With several investment options from mutual funds to fractional investing available today, Indian investors can build a strong and diversified portfolio by investing in international markets. A trove of information and dynamic trading apps have made the possibility of superior gains more tangible than ever. However, an investor needs to evaluate his risk tolerance, financial goals and adhere to specific country rules and norms.
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