NSE IFSC Introducing Trading in US Stocks for Indian Investors
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NSE International Exchange (NSE IFSC) is proposing to allow trading in US stocks directly by Indian investors. NSE IFSC Limited is a wholly-owned subsidiary of National Stock Exchange of India Limited (NSE). It operates from Gujarat International Finance Tech City (GIFT) - International Financial Service Centre (IFSC), Gandhinagar, Gujarat, India.
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The date of commencement of trading in US stocks is yet to be announced. Through NSE IFSC platfrom, Indian investors can start trading and/or investing in stocks listed in the US stock exchanges. The basket of stocks will consist of about 50 stocks initially, selected from Technology stocks, like, Apple Inc, Alphabet Inc, Amazon Inc and others; and from old economy stocks, like, GE and others. The stock selection will be based on their market capitalisation and liquidity.
Within the limits prescribed by Reserve Bank of India (RBI is India's central bank) under Liberalised Remittance Scheme (LRS), Indian retail investors will be able to transact on NSE IFSC. NSE IFSC proposes to offer a low-cost and easy to transact platform for such investors, who will be able to trade in fractional quantity / value of the underlying US stocks.
For example, Tesla Inc's share is trading on Nasdaq at around USD 710 per share. As it's too expensive to trade in such a high-priced stock, Indian investors will be provided with an option to trade in Tesla at a price of say USD 7, which is a fraction (one-hundredth) of the actual underlying Tesla share value of USD 710 through unsponsored depository receipt (DR) route*.
It may be noted that Indian investors are allowed to invest abroad (or send money abroad) upto USD 250,000 per financial year under RBI's LRS as per existing norms.
Investors holding these depository receipts will be able to hold these DRs in their own name through demat accounts opened in GIFT City.
These demat accounts are offered by two depositories, namely, National Securities Depository Limited (NSDL) and Central Depository Services (India) Ltd (CDSL). Investors can view their holdings via periodical statements by NSDL or CDSL as is the case with investors holding shares in Indian stocks.
As holders of US stocks, Indian investors will be able to enjoy the benefits of all corporate actions, like, dividends, share splits, bonues, buybacks and others.
NSE IFSC is making arrangements to introduce this platform as soon as possible and Indian investors can access this platform through their banks and brokers.
NSE IFSC will be regulated by International Financial Services Centres Authority (IFSCA), which is a statutory body of the Government of India.
International Financial Services Centres Authority (IFSCA) has been established as a unified regulator to develop and regulate financial products, financial services and financial institutions in the International Financial Service Centres (IFSCs) in India.
Established as an international financial centre, GIFT City offers the following benefits, which include exemptions from security transaction tax, commodity transaction tax and dividend distribution tax; capital gain tax waivers and zero income tax.
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* According to Investopedia, an unsponsored depository receipt is issued by a depository bank without the involvement or consent of the foreign company it represents ownership in.
References:
NSE IFSC press release dated 09Aug2021 - Introduction of Trading in US stocks
My blog dated 05Oct2011 on RBI's Liberalised Remittance Scheme
Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
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