Buying US Stocks on the NSE IFSC Exchange

The key to enjoying better returns from your investments is portfolio diversification. This means you invest in different asset classes with varying risks. Stocks provide this option, especially with the introduction of NSE IFSC Ltd.

 

You can now invest in stocks outside the country as this is an international exchange where you can trade in stocks of companies outside India. This allows further diversification of your portfolio, giving you the opportunity to earn more. 

 

To know more about NSE IFSC exchange and how you can trade on it, read on.

Wholly owned subsidiary of NSE (National Stock Exchange), NFSC IFSC is established in Gujarat International Finance Tech (GIFT) City in Gujarat. NSE GIFT city is an SEZ (special economic zone) that hosts the country’s International Financial Services Centre (IFSC). 

 

Primarily, the platform only offered solutions to foreign and NRI investors who intended to invest in the Indian equities markets. However, recently, the platform received permission to allow retail Indian investors to invest in US stocks.

 

At present, NSE IFSC Ltd., offers 50 US based stocks including Amazon, Tesla, Netflix, Microsoft, Apple, and others. It is important to keep in mind that your investments through this platform will be under the Liberalised Remittance Scheme (LRS) and capped at 2.5 Lakhs USD.

Like any other stock investments, you need a demat account to invest in stocks through NSE IFSC stock exchange platform. You can open a demat account with any broker registered on the platform. 

 

Alternatively, you can contact your current broker to see if they are a registered broker on the platform. At present there are over 35 brokers registered on the NSE IFSC platform. Once you have opened your demat account, you can transfer money to the registered broker’s account. 

 

Keep in mind that your funds will be converted to USD and you can invest only 2.5 Lakh USD every year.

Before you begin investing in US stocks through NSE IFSC, keep the following points in mind:

 

• You will receive Depository Receipts (DR) and not the actual stocks of the company

• HDFC IBU (HDFC Bank IFSC Banking Unit) buys and sells stock on behalf of the investors and issues DRs to investors

• With the help of DRs, you can buy US stocks in fractions

• The shares must be listed in S&P 500 index and on Nasdaq and NYSE for a minimum of 12 months

• You, the investor, have to buy the required dollars from your local bank as LRS limits

• The trade timings of NSE IFSC stock exchange differ from the Indian stock market and are longer for some securities

• NSE IFSC trading hours begin at 8:00 pm (IST) and end at 2:45 am (IST) 

• The price movement, in either direction, of any share or security listed on NSE IFSC is at $0.01, i.e., one cent

Investments in any market, including in US shares, requires you to bear some costs that impact your earnings. As such, knowing these costs beforehand will allow you to make an informed decision that offers the returns you need. 

 

Here is an overview of the associated costs:

• Brokerage and Demat

Like your stock investment in the domestic market, investing in US shares through NSE IFSC also attracts brokerage demat charges. These charges may vary depending on the broker you choose.

• Currency Conversion Charges

As mentioned, you need to convert your Rupees into Dollars before you can begin investing in the US shares. As such, you will have to bear currency conversion charges for your investment.

• Transaction Fees

When you trade through the NSE IFSC Ltd., every transaction of $100 is subject to a charge of $0.12 cents. However, you don’t have to bear any STT or stamp duty charges.

• Taxation

The returns you earn from your investment in the US market (dividend or STCG/ LTCG) is subject to taxation as per the applicable rules. It is essential to check these to ensure that you adhere to the tax rules and make the most of your investment.

Before you begin investing and trading through the NSE IFSC exchange platform, be sure to ensure that your portfolio is adequately diversified within the Indian stock market. This way you can ensure that you have a well-diversified portfolio and can make the most of your investments.

 

Make sure that you do your due diligence and have all the necessary paperwork before and after you begin trading. Factor in all the costs associated with it so you can maximise your returns. 

 

Keep in mind that while NSE IFSC opens the door to a greater geographical diversification, it also carries different risks, making it pertinent to research before investing. Conducting proper research before investing in foreign markets will allow you to keep your investment protected.