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NSE IFSC opens up another door for Indians to invest in US stocks

Market makers will buy shares in US, and investors will be issued NSE IFSC Receipts


Resident Indians looking to invest in US stocks now have another avenue to do so. NSE International Exchange (NSE IFSC), a subsidiary of the National Stock Exchange of India (NSE), has launched trading in unsponsored depository receipts, which will offer Indian retail investors an opportunity to invest in shares listed on exchanges like the Nasdaq and the NYSE.

For now, investors can buy and sell eight stocks of US-listed companies – Alphabet, Amazon, Tesla, Meta (Facebook), Microsoft, Netflix, Apple and Walmart. This basket will be over time expanded to 50 stocks.

What one must know is that market makers will buy shares in the US, and the Indian investors will be issued NSE IFSC Receipts (essentially unsponspored depository receipts), depending on the ratio, linked to the value of the underlying share.

For instance, one share of Amazon will equal 200 NSE IFSC receipts and one share of Apple will be equivalent to 25 NSE IFSC receipts.

HDFC Bank's IFSC banking unit in the GIFT City will be issuing the NSE IFSC Receipts in its role as a custodian.

“This shall make the entire process of investing in global stocks for Indian retail investors seamless in a regulated environment,” said Vikram Limaye, MD and CEO of NSE.

NSE IFSC Clearing Corporation will offer its risk management framework, facilitate clearing, and settlement of all trades in depository receipts and provide settlement guarantee with respect to all trades executed on the NSE IFSC platform.

To start trading on the NSE IFSC platform, one needs to open a demat account with a stock broker registered with NSE IFSC. The NSE IFSC receipts will be held in the investor’s demat account opened in the Gift City.  

You can invest through this facility under the liberalised remittance scheme (LRS), where RBI has set a limit of $2,50,000 in a financial year.    

“This innovative offering from NSE IFSC enables retail resident investors to transact in select US stocks through the NSE IFSC platform initially under the regulatory sandbox framework and eventually as a regular product on the exchange for all international and domestic investors,” said Injeti Srinivas,chairman, IFSCA.

This provides an additional investment opportunity to Indian investors with easy investment process and at low cost, says Hemang Jani, head of equity strategy, broking and distribution at Motilal Oswal Financial Services.

“(There is) option to trade in fractional quantity/ value when compared to the underlying shares traded in US markets. Investors will be able to hold the depository receipts in their own demat accounts held in GIFT City and will be entitled to receive corporate action benefits pertaining to the underlying stock,” he said.

The NSE IFSC is not the first one to offer Indians an access to US equities. There are multiple avenues currently allowing Indians to diversify their investments and get access to global stocks.

For instance, several domestic brokers have tie-ups with fintech firms that allow buying and selling US stocks.

The India International Exchange (India INX), BSE’s international arm, goes further than just US stocks. Through, its subsidiary India INX Global Access, investors can get access to 135 stock exchanges and trade in 23 currencies.

The India INX Global Access allows you to buy stocks, exchange traded funds (ETF), mutual funds and bonds on the platform. This facility, according to V Balasubramaniam, allows investors to buy stocks easily just like a local US investor would. Do note that this also falls under the RBI’s liberalised remittance scheme, so the investment will be capped at $2,50,000. This facility can availed through brokers registered through India INX or directly through India INX Global Access.

Through this facility one can also buy fractional shares. So you can even buy a stock of say Tesla worth $1 (one Tesla share currently costs around $839).

If one doesn’t want to go through the LRS route, then an investor can always buy mutual funds or exchange traded funds that invest in international stock markets. There are many such offerings by several domestic mutual fund houses and one invests directly through rupees.

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