Along with diversification across various assets such as equity, debt, gold and real estate, one should also look at diversifying geographically. And, the US stock market provides access to investors with exposure to world’s leading companies across information technology, digital, pharmaceutical, automotive and other key emerging themes.
Buying US stocks on NSE International Exchange (NSE IFSC), a wholly owned subsidiary of the National Stock Exchange of India helps one diversify a stock portfolio with international stocks. Diversification of your investment portfolio plays an important role in the generation of steady risk-adjusted returns over the long term.
Here are 10 things to know about the NSE IFSC platform where you can invest in US stocks from India.
1. How to start buying US stocks
After opening your trading and demat account with NSE IFSC registered brokers, you can Transfer funds from your local bank account to NSE IFSC registered brokers bank account. Once the fund reflects in your broker’s account you are ready to trade in NSE IFSC US Stock.
2. What will an investor hold
On buying US Stocks, what you as an investor get is a NSE IFSC Receipt . A NSE IFSC Receipt is a negotiable financial instrument in the nature of an unsponsored ‘depository receipt’, issued by the NSE IFSC Receipts Custodian, namely HDFC Bank Limited IFSC Banking Unit (HDFC Bank IBU), on the basis of underlying securities issued by a U.S.- listed company, which gives the holder of such NSE IFSC Receipts a proportionate beneficial interest in the underlying security itself.
NSE IFSC US Stocks are unsponsored Depository Receipts. By acquiring NSE IFSC US Stocks, the investors get exposure to the financial performance of the underlying shares and the benefit of certain rights attached to such underlying shares, without acquiring it directly.
3. List of brokers
There are several authorised and approved Trading Members with whom you can open the demat account. Some of them are:
Anand Rathi International Ventures (IFSC)
Edelweiss Securities (IFSC)
Emkayglobal Financial Services IFSC
Findoc Investmart (IFSC) Private Limited
HDFC Bank Limited- Ifsc Banking Unit (IBU)
SMC Global IFSC Private Limited
4. Demat account
The NSE IFSC Receipts shall be held in the dematerialized form in the demat account which will be opened with the IFSCA registered broker (acting as a depository participant) or with any other depository participant.
5. Trading of US stocks
Intra -day trading is allowed in NSE IFSC Receipts. However, in respect of Indian Retail Investors, intra -day trading is allowed, provided:
Investor does not take any positions/ execute any trade which would exceed the overall LRS limit of USD 2,50,000 per financial year.
Each transaction is adequately backed by the entire transaction value.
Sell transactions should be either backed by NSE IFSC Receipts or should be a sell transaction against an open buy position created during the day. Short selling of NSE IFSC Receipts by the Indian Retail investors will not be permitted.
All NSE IFSC Receipts that are bought and sold on NSE IFSC platform shall be settled through NSE IFSC Clearing Corporation Limited (NICCL). The settlement of funds and NSE IFSC Receipts shall happen on T+3 day.
7. Key Features
Trading available in US Stocks
Protected by IFSCA regulations
Trading in Fractions
Corporate Action Entitlement
Trading under LRS facility
Trading and Settlement in USD
Liquidity by Global High Frequency Trading (HFT)
8. Trading timings
Trading Opens : 8:00PM IST (9.30AM ET) and Trading Closes : 2:30AM IST next calendar day (4.00PM ET) to be adjusted as per daylight saving.
9. How much maximum one can invest
Liberalized Remittance Scheme is introduced by the RBI as a liberalization measure to facilitate resident Indian individuals to freely remit funds up to USD 2,50,000 outside India in a financial year (April to March) for any permissible current or capital account transaction or a combination of both.
Taxes applicable to an Indian Retail Investor will be as follows:
Withholding Tax on cash dividends paid out by U.S. corporations to non-U.S. shareholders
Global dividend income is taxable in India. Taxed as per the applicable income tax / corporate tax rates in India.
Sale of IFSC Receipts (or the underlying shares)
Sale of underlying shares is not subject to tax in India
Long Term Capital Gains (LTCG) or Short Term Capital Gains (STCG) is applicable based on the period of holding such NSE IFSC Receipts.
This may further be subject to the treaty benefits applicable at IFSC.