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How Indian Investors Can Directly Trade in 8 Major US Stocks

INTRODUCTION:

Whether you are an investor or not, you must have heard how the major US stocks generate enormous returns for their investors. Historically, the US stock market’s return has typically surpassed that of the Indian stock market. Additionally, most of the world’s renowned companies like Microsoft, Tesla, Alibaba, etc., are either based in the US or listed on the US exchanges.

Many Indian investors want to trade or invest in the US market. If you are pondering whether you can trade US stocks from India. Yes, it’s possible. In this article, we will discuss how you can directly trade US stocks from India and the pros and cons of investing in US stocks.

How to Directly Invest in US Stocks?

First and foremost, investors and traders should know foreign investment rules and regulations. The Foreign Exchange Management Act (FEMA) 1999 regulates investments outside India. The Liberalized Remittance Scheme permits residents of India to invest in global markets. This scheme allows residents to remit $250,000 in a financial year.

These are approaches through which you can trade US stocks from India:

1. Opening an international trading account: You can open this account either through a domestic or foreign broker. Multiple domestic brokers have link-ups with international brokerage firms. The domestic brokers act as intermediaries and facilitate trade. This mode of investing cost offers limited trading or investing opportunities. You can also directly open a trading account with an international broker if they provide their services in India. However, before you invest through an international brokerage firm. Make sure to read up on the fees and taxes they charge, as they can be quite different from the fees charged by the domestic brokers.

2.  GIFT City IFSC: The NSE and BSE provide Indian investors with the opportunity to invest in US stocks. The NSE-owned NSE – IFSC facilitates investments in the top 8 US companies. It has a future plan to upgrade its offerings to the top 50 US stocks. The BSE owns India INX. Unlike NSE-IFSC, which functions as an exchange, India INX operates as an intermediary. They have collaborated with a US brokerage firm, Interactive Brokers, to provide access to the entire US market offerings to Indian investors.

Investing in US stocks – Pros and Cons

Investors today have access to the global market. International investing is an excellent way for portfolio diversification. However, investors must pay heed to the risks and rewards associated with international investing to make informed decisions. These risks and rewards inherent to investing in US stocks are given below:

Pros

  • Portfolio Diversification: Investing in international stocks protects your portfolio from a country-specific risk. Investing in US stocks is a good way to minimize the risk of your portfolio and diversify it.
  • Growth Opportunity: Different countries have varying growth prospects. Although developing nations have more growth potential than developed countries, the risks associated with such countries are also more significant. Investing in a developed nation like the US helps you achieve good, stable growth with low risks.
  • Currency Appreciation: The INR has historically depreciated against the US dollar. Investing in US stocks can be a hedging tool to protect the portfolio from an appreciating USD.

Cons

  • High Transaction Costs: Investing in US stocks through an overseas trading account or the GIFT city carries high transaction fees. These fees include forex charges, transfer charges, broker’s fees, etc.
  • Exchange Risk: As international investing involves two currencies, there is a possibility of either depreciation or appreciation of the domestic currency against the foreign currency.
  • Country-Specific Risk: Each nation has its own set of problems; economic, political, social, etc. When you invest in international stocks, you must consider these risk factors.

It is easy to invest in US stocks from India. However, before you do that, understand the risks associated with such investments. Evaluate and understand the fees charged by the brokerage firms. Conduct proper, thorough research before you invest in US stocks.

Eleena Wills
Hi, I’m Eleena Wills. Being a writer and blogger, I strive to provide informative and valuable articles to people. With quality, constructive, and well-researched articles, one can make informed choices. I cover a wide range of topics, from home improvement to hair styling and automotive.
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