The US stock market had gained significant traction among investors after November 2021, when it was at an all-time high. It is one of the largest economies in the world that allows long-term investors to diversify their stock portfolios significantly. Indian investors who have invested in the US market earlier have enjoyed significant returns.
US stock investing has become easier than ever with the NSE IFSC trading services. The exchange has started to facilitate you to trade US stocks directly. As of now, it allows you to trade 8 stocks. Soon the number of tradable stocks from India will be increased.
International Financial Services Centre (IFSC) received the green signal from the Indian Capital Market Regulator – Securities and Exchange Board of India (SEBI) – in March 2022 to facilitate the stock market investors with US stock trading. NSE IFSC, located in Gujarat International Finance Tec (GIFT) City, is a subsidiary of the National Stock Exchange. The trading currency is the American Dollar.
Currently, you can trade the following 8 US stocks on the NSE IFSC exchange:
- Alphabet Inc (GOOGLE)
- Amazon,
- Tesla
- Meta Platforms (Facebook)
- Microsoft
- Netflix
- Apple
- Walmart.
The list will include Morgan Stanley, P&G, Nike, Coca-Cola, Paypal, McDonald’s, Johnson & Johnson, Berkshire, Mastercard, Visa, Chevron, Morgan Stanley, Hathaway, JP Morgan, and Exxon Mobil.
Let us understand how you can trade US stocks from India directly through NSE IFSC.
How to Trade US stocks through the NSE IFSC platform
- Investors need to create a demat account with the IFSC. Individuals must complete KYC formalities on the NSE IFSC while registering with an IFSC Authority – the registered trading member. Earlier, Indian investors were allowed to invest through appointed online brokerage firms in the US that had permission from the US and Indian market regulators.
Currently, 15 state-owned and private banks are authorized as IFSC Banking Units (IBUs). Individuals can transfer funds from their registered bank account to the stock broker’s account in their IBU. 15+ renowned brokers, members of NSE IFSC, have started their subsidiaries in Gift City. Your broker at IFSC can help you in intraday trading in US market from India.
What is the Investment Unit on the Exchange?
- The unit of investment on the NSE IFSC is an unsponsored depositary receipt (DR). The shares will be held as IFSC depository receipts (IFSC DRs) because investors can trade in fractional shares.
- It is a negotiable financial instrument and derivative product. These stock receipts are considered foreign assets for filing ITR.
Companies offer sponsored DRs. When DRs are not offered directly by a company, they are known as unsponsored DRs.
If you own one receipt, it does not mean you own a share in that company. Leaning on the company policy, you may require 5 to 200 unsponsored DRs to own one stock. For example, a share of Apple Inc may be equivalent to 25 NSE IFSC DRs. A share of Amazon Inc can be equal to 200 DRs.
The receipt holder will be provided with a proportional benefit in the underlying stock. Individuals can hold DRs in their demat accounts and receive corporate benefits in their demat accounts. However, investors may not get the same benefit with inadequate DRs needed.
What is the cap to investing in the US stock market?
- This investment in the US market will be made under the RBI’s LRS (Liberalised Remittance Scheme). The investment is capped at a maximum of $250,000 (Rs.1.9 crores) in a year. The minimum ticket size is as low as $0.01.
Thus, just like you buy stocks in India, you can buy stocks in the US in the form of DRs. Trade through registered brokers with NSE IFSC and get benefits from the stock market with a fractional share.
