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Indian investors starting today will be able to invest in US stocks such as Google, Amazon, and Tesla directly on the NSE IFSC (NSE International Exchange). NSE IFSC is a wholly-owned subsidiary of the National Stock Exchange of India (NSE) and has received approval from the market regulator to establish an international exchange in GIFT – International Financial Service Centre (IFSC) Gandhinagar.
On the exchange, trading is permitted in equity shares of companies incorporated outside of India, depository receipts, debt securities of eligible issuers, currency, index, interest rate and non-agriculture commodity derivatives. It is the exchange that will offer trading of the derivative.
The exchange has received approval to trade receipts of top 50 US-based stocks which include Apple, Alphabet, Amazon, Tesla, Microsoft, Morgan Stanley, Nike, P&G, Coca-Cola, and Exxon Mobil. However, only eight will be available from March 3. This include Amazon, Apple, Alphabet (Google), Netflix, Tesla, Meta (Facebook), Walmart, and Microsoft.
NSEIFSC Receipts: Equivalent to Owning Stake
In order to make US stocks accessible to Indians, market makers will buy shares in the US and issue receipts against them, which will be known as NSEIFSC Receipts. They will be equivalent to owning a stake in the company whose receipt they will be. You can buy or sell these receipts just as you would buy or sell shares of the companies.
However, if say an investor owns one reciept then it does not convert into owning a stock in the company. NSE IFSC said it will release the receipts in a certain ratio. For example, one share of Tesla will be equivalent to 100 NSE IFSC receipts. That means, the value of Tesla’s receipt will be about one-hundredth of the value of Tesla shares.
Investment Limit?
Indian retail investors can transact on the NSE IFSC platform under the Liberalized Remittance Scheme (LRS) limits prescribed by the Reserve Bank of India. Currently, under the LRS rules, a resident individual is allowed to remit up to $2.5 lakh (USD 2,50,000 ) in each financial year.
The trading currency will be US Dollars and the minimum ticket size is $0.01. The trading will start at 8:30 pm on day one to 2:30 pm the next day.
Trading in US Stocks Becomes Easier
Currently, the route to invest in US stocks is cumbersome and expensive. But it will be much easier now. In a note, Motilal Oswal said this presents an additional investment opportunity to the Indian investors with an easy investment process and at low cost. You will have the option to trade in fractional quantity value when compared to the underlying shares traded in US markets. Investors will be able to hold the depository receipts in their own demat accounts opened in GIFT City and will be entitled to receive corporate action benefits pertaining to the underlying stock.”
How to Invest?
According to Motilal Oswal, first, you will have to open trading and demat accounts with NSE IFSC registered brokers. Presently, 36 brokers are registered with the exchange. After that you need to transfer funds from your local bank account to NSE IFSC registered broker’s bank account. Once the fund reflects in your broker’s account, you are ready to trade in NSE IFSC US stocks.
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