Foreign stocks are stocks issued by companies that are located outside of India. Non-domestic giant companies, like domestic blue-chip companies, make excellent investment opportunities. When a person decides to invest in foreign stocks, they can reduce the risk in their portfolio while also taking advantage of the lucrative opportunities available in foreign markets. Here are three ways Indian investors can invest in foreign stocks.
There are numerous options for investing in foreign stocks from India. Furthermore, investing in international stocks, including purchasing US stocks from India, is entirely legal. In addition, investing in Nasdaq stocks, a popular index in the US stock market is gaining popularity among Indian investors.
Here are 5 ways to invest in the US stock market
There are numerous ways to diversify your portfolio by investing abroad, ranging from direct stocks to mutual funds to exchange-traded funds. Diversifying geographically, in addition to diversifying across asset classes, market capitalization, sectors, and so on within a country, helps to manage your portfolio’s risk-adjusted return. Of course, the impact on global economies may differ, and it is always better to remain geographically diverse to manage portfolio risk.
INX Global Access India
BSE’s international arm, the India International Exchange (IFSC) Limited (India INX), also provides access to international stock. You can trade in global stocks through its wholly owned subsidiary India INX Global Access, including shares of major US-listed companies. India INX intends to offer stocks from the United States, Canada, the United Kingdom, Europe, Australia, and Japan, covering roughly 80% of the investing universe.
NSE International Exchange (NSE IFSC), a wholly-owned subsidiary of the National Stock Exchange of India, also allows you to buy direct US stocks. You can transfer funds from your local bank account to the bank account of NSE IFSC registered brokers after opening your trading and demat account with them. When the fund appears in your broker’s account, you can begin trading on the NSE IFSC US Stock platform.
ETFs are exchange-traded funds.
ETF units, unlike mutual funds, are traded on the stock exchange during trading hours. So, whenever the exchanges are open, one can buy and sell ETF units in the same way that one buys stocks. Moreover, ETFs can be traded by anyone who has a demat account with any brokerage firm. In addition, several ETFs provide access to the Nasdaq and other leading global indices.
International mutual funds
There are international mutual fund schemes available that allow you to go global and invest abroad. While some of these mutual fund schemes track Asia-Pacific or Latin American indexes, most of them track the US market. In addition, some schemes invest only in the US market while also holding positions in domestic stocks. However, fund houses have recently been asked to slow down on collecting deposits for overseas funds. Read on to find out why the restrictions are in place.
You can buy US stocks from India as you can from the Nifty 50, Sensex, or any other index. However, you must complete some formalities, such as opening an international brokerage account and meeting the RBI’s LRS requirements. For all this, you can contact any foreign broker in India, such as Stockal, Vested Finance, or Winvesta. Once the accounts are established, you can diversify your domestic portfolio by purchasing US stocks or ETFs across sectors and themes.
Now that you know different ways to gain access to foreign share trading, it’s critical to consider the risks involved. First and foremost, there is the risk of currency exchange. Even if your foreign stocks are profitable, falling rupee rates can affect your exchange rate and increase your risk of loss.
Opening international trading accounts is also significantly more expensive than trading with Indian brokers. The margin money requirement is significantly higher than the average Indian broker. Furthermore, the brokerage fees themselves are higher. The United States ranges from 0.75% to 0.9% per trade. Knowing these dangers can help you make wise investments in foreign stocks.