With increasing interest in US listed stocks, especially stocks of tech giants Facebook, Amazon, Apple, Netflix and Google, NSE International Exchange (NSE IFSC) on Tuesday, 10 August, said it will set up infrastructure for Indian investors to buy US stocks.
According to a report by The Times of India, the new infrastructure will allow investors fractional ownership of US stocks , who would need to open demat accounts with entities based in International Financial Services Centre (IFSC) GIFT city.
But how can one invest in US stocks from India and what must investors know about US markets? We list some answers.
What are FAANG stocks?
FAANG is acronym for Facebook, Amazon, Apple, Netflix and Google. These are among the most popular and largest listed companies in the US in terms of investor interest.
It is worth noting that Apple is currently the largest company in the US in terms of market capitalisation. While Google (now Alphabet), Amazon and Facebook are listed amongst the top five tech companies.
On the other hand, Netflix is the smallest of the lot but on par with the others in terms of popularity.
What is the new change?
The NSE International Exchange, a wholly-owned subsidiary of the National Stock Exchange (NSE), is introducing trading in select US stocks.
"The entire trading, clearing, settlement and holding of stocks listed in US will be under the regulatory structure of IFSC authority," a press release by IFSC read.
This initiative is a first of its kind at IFSC where Indian retail investors will be able to transact on the NSE IFSC platform under the Liberalized Remittance Scheme (LRS) limits prescribed by the Reserve Bank of India (RBI).
How can I buy/sell US Stocks?
To buy/sell US stocks follow these steps:
Open an account with a broker registered with NSE IFSC in GIFT City
Complete the mandatory KYC process
After your account is created, you can now remit funds up to $2,50,000 through the LSR option. This amount cannot be used for speculation or derivative trading
You will be able to buy US stocks but remember that NSE arrangement only allows fractional ownership of stock
What do you mean by fractional ownership of stocks?
Fractional ownership means when the cost of an asset is split between many shareholders.
Indian investors can only buy US stocks through designated online brokers who have permission from US and Indian regulators. But, these brokers only permit the ownership of up to one-millionth of a US stock.
Why should you buy US Stocks?
Tech giants have a global presence and US stock market is one of the top choices to invest when it comes to diversifying investor's portfolio.
US is home to some of the best technology giants and many other wealth creating businesses that offer great investment opportunities.
The recent listing of Robinhood on Nasdaq is the perfect example of how Indian investors are interested in diversifying their portfolios in assets that are not yet available in India.
According to Stockal data for FY21, Indian investors have invested in over 5000 securities abroad, gaining massive returns.
What are the benefits of investing in US stocks?
NSE IFSC in a statement said that investors will be able to hold the depository receipts in their own demat accounts (opened in GIFT city) and will be entitled to receive corporate action benefits pertaining to an underlying stock.
When will NSE IFSC launch trading in US stocks?
The NSE International Exchange did not give any tentative date for the launch of trading is US stocks. However, media reports suggest that the rollout can be expected later this year.
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