How to Invest in US Stocks From India

By | May 18, 2024

There are two different ways to invest in US stocks from India. The first one is the direct route – buying shares from US stocks exchange like NASDAQ. This method is similar to buying shares from NSE or BSE.

 

Second is the indirect method that involves investing in US stocks through mutual funds.

Let me explain, you can see from the table below that NIFTY 50 generated around 100% returns in the last 5-year period.

Whereas during the same time, NASDAQ’s 5-year returns of 196% (shown below) are almost double than the returns generated by Nifty 50.

If you compare the 10-year returns from the US stock, you will find it to be more than double the returns given by NASDAQ.

Other benefits of investing in US stocks are

  • Investing in fractional shares (I will explain this in detail)
  • You get dividends even on fractional shares
  • Trading time starts at 7 pm IST (after you reach home from office)
  • Exciting tech and finance companies to invest
  • Help bring USD back to India

You can legally buy stocks of US companies like Amazon (AMZN), Facebook/Meta (FB), Google (GOOGL), Tesla (TSLA), Apple (AAPL) and Netflix (NFLX) from India.

In this article, I have taken questions like – “How to invest in foreign stocks from India” and “How to invest in international stock markets from India” to mean and include investing in US stock markets.

Because presently the returns given from the US stock market are the most profitable.

Another reason is that – people hardly look forward to investing in Tokyo, Singapore, London, Germany or Bahrain stock markets due to the non-availability of stock investment services by any reputed broking house.

Is Investment in US Stocks From India Legal

Yes, RBI allows it under the LRS scheme.

The RBI Liberalised Remittance Scheme (LRS) allows all resident individuals from India to freely remit an amount up to $250,000 per financial year (April to March) out of India.

You are free to use the money for various permissible transactions listed under FEMA. Investment in US stocks (foreign securities) is one of the permissible transactions.

Note – But you can’t do leverage trades involving margins, like – intraday trading, derivatives trading and F&O trading with the money remitted abroad under LRS. 

At the current exchange rate of Rs. 82.27 per USD, you can invest around Rs. 2.05 Crore in the US stocks under the RBI LRS scheme.

LRS categorizes investment in US stocks as a capital account transaction under the scheme.

How to Invest in Foreign Stocks From India

Two methods to invest in foreign stocks are

  • directly through an investment broker (stockbroker) or
  • indirectly through mutual funds that invest in international stocks

Investing through a broker allows you to directly buy and sell stocks on international exchanges like NASDAQ.

Brokers Offering US Stock investing services in India are

  • 5Paisa
  • ICICI Direct
  • HDFC Securities
  • IND Money

Drawbacks – The currency exchange rate movement and charges will eat a portion of your profits when investing directly in foreign stocks.

Investing in mutual funds that invest in international stocks can be a more affordable and convenient option for Indian investors.

Many mutual funds in India offer access to international stocks. A few of them are

  1. Franklin India – Franklin US Opportunities Fund
  2. ICICI Prudential US Bluechip Equity Fund
  3. Motilal Oswal NASDAQ 100 ETF
  4. SBI Magnum Global Fund

Mutual funds handle all the currency-related processes like transfer, Fx conversion and remittance. They eliminate the need for you to worry about fluctuations in exchange rates.

Drawback – You also don’t have the option of selecting stocks as you wish. Additionally, mutual funds charge expense and management fees, which will lower your returns.

Leave a Reply

Your email address will not be published. Required fields are marked *