You want to buy Indian stocks and equity in India, National Stock Exchange and Bombay Stock Exchange are the two exchanges that act as ‘supermarkets’ to buy and sell domestic stocks. And a lot of brokers like Zerodha, Groww, Upstox, AngelOne facilitate the sale from these exchanges, they could be called logistics providers.
But what if along Reliance, HDFC Bank, Infosys and other Indian Stocks you also fancy Meta, Alphabet, Tesla and Netflix Stocks?
Like HDFC Securities, Stockal and IndMoney
What is the challenge?
The process is a bit of a rocky road. From Opening, to documentation, adding funds and transactions. An investor will have to take care of Forex formalities, which means – as an Indian citizen when you buy USD using INR you will be scrutinized under the Liberalized Remittance Scheme.
Now, LRS allows you to remit upto 2.5 lakh USD which is roughly INR 1.8 crore. Once the confusing paperwork is completed, the bank takes a certain 3-4% outward bank transfer charge for transferring and conversion of funds. The next set of charges are about $5-10 account opening fees, $3-4 for every trade that gets executed and another $11-15 when you wish to withdraw the amount.
What are the benefits?
From 2020 onwards, investing in foregin stocks has gotten easier with platforms like Stockal and INDmoney. All’s not gloomy though. A major advantage that direct investing has is that you get to own the equity of the company directly. You are a direct shareholder in the company and you receive all the benefits of any corporate actions.
Like Motilal Oswal Nasdaq 100 ETF or Flexi Cap Mutual Funds
What is the challenge?
When you choose to buy an ETF or Mutual Fund that is based on US stocks and indices – you buy the units of the fund and not equity in the stock. Meaning, you become a passive investor.
However, SEBI in February cautioned mutual fund houses about the limits for investment in overseas assets. SEBI then ordered mutual fund houses to stop accepting fresh lump sum investments as the industry wide overseas limit of $7 billion had been breached. And hence came the regulations. And we occupy a pause, now. There can be no new lumpsum investments in such schemes at-the-moment.
What are the benefits?
As Funds are managed by Fund Managers who have expertise in finance, there’s a sense of trust and responsibility. That is why, The assets under management of international funds offered by domestic mutual funds for Indian investors went up to INR 39,658 crore from INR. 3,688 crore two years ago. Number of foreign investment accounts went up six-fold. As quoted by ET ‘Superior returns from US indices, a weak rupee vis-à-vis the dollar and the newer investment opportunities in overseas markets made investors choose international funds.’
But these have certain problems. But now we have the third and the newest entrant to this list. A ‘GIFT’ from NSE
Enter NSE IFSC
GIFT City, or the Gujarat International Finance Tec City is a planned city built in Gandhinagar. And it is here that the National Stock Exchange has started its subsidiary called International Financial Service Centre. With IFSC, NSE’s aim is to make US Stocks simpler and more affordable for Indian retail investors. NSE is planning on making 8 of the largest US stocks- Amazon, Tesla, Alphabet, Meta, Microsoft, Netflix, Apple and Walmart available for Indian Retail investors. This although does not mean that US stocks are going to be listed in India. It is a derivative product called NSEIFSC receipts.
What are NSEIFSC receipts?
Firms and market makers who deal in securities, will buy shares in the US and issue receipts against them. These receipts will be issued by the NSE IFSC to investors. And they will be equivalent to owning a stake in the company. This however does not mean that owning one receipt of a stock is the same as having a share in the company.
NSE’s plan is to release receipts in a ratio, for example, one share of Netflix shall be equivalent to 50 NSE IFSC Receipts, one share of Amazon shall be equivalent to 200 NSE IFSC Receipts.
Timings and holidays shall all work on US trade timings which means IST 8pm to 2:30 am in the night. Traders to become night owls huh?!
Investors need not route their investments through a broker registered in the US to buy shares of Netflix and Google. Thereby reducing charges considerably and removing some of them completely. Investors will be able to experience and indulge in US stocks at a fractional rate and in fractional quantities in their own DEMAT accounts. Fractional investing is one very interesting concept, which allows you to buy fractional quantities. Which means, you can buy 0.3 Amazon Shares, 0.5 Netflix Shares and 0.1 Meta Shares. Which allows you to invest in large companies with a considerably lower amount.
It’s the best of both worlds (Direct Investing and Mutual Fund investing)
It’s already begun. 3rd March 2022, is the day when Indians would get to experience the largest stock market in the world in their own country. Are you taking the dip? With NSE IFSC Receipts, Short-term capital gains will be taxed at the slab rate while long-term capital gains will be at 20 per cent with indexation. And we at Quicko will always be here, with the solutions for all your tax woes.