SEBI bars ETFs from investing abroad, but some routes to buy Nvidia, other US shares still open

SEBI's directive comes at a time when global markets, especially in the US, are reaching new highs.

The Securities and Exchange Board of India has directed the Association of Mutual Funds of India (AMFI) to halt accepting further inflows into funds that invest in overseas ETFs starting from April 1. SEBI's directive comes at a time when global markets, especially in the US, are reaching new highs. There are growing expectations of three rate cuts by the Federal Reserve in 2024. Additionally, the record-breaking rally in technology stocks, particularly led by chipmaker Nvidia amid optimism over the future prospects of AI is driving interest in US chip stocks.

"SEBI's directive to mutual fund schemes with investments in ETFs listed on foreign exchanges comes as the Mutual Fund industry reaches close to the investment limit of $1 billion set by the regulator for this category," said Chirag Mehta, CIO, Quantum AMC. "This is reminiscent of the time when the industry had reached the $7 billion foreign investment limit and had to suspend flows in funds investing in stocks overseas."

Also Read | SEBI asks mutual funds to stop accepting inflows in ETFs investing overseas

Regardless of SEBI's roadblock, the rage for Nvidia and other US stocks has been on a high as market enthusiasts wish to grab a pie of these scrips amid their growing popularity. It is all thanks to Nvidia's meteoric rise  that has made investors across the world sit up and take note, many of whom might be wondering how they can get a piece of the action.

Nvidia has highly benefited from the AI race as artificial intelligence models are made using the company’s graphic processors. On February 21, Nvidia reported revenue of $22.1 billion which was 265 percent up from the previous year. Net income rose by 769 percent YoY to $12.3 billion, which beat the expectations of the Wall Street.

While the SEBI's directive closed one door through wish Indian investors could jump on the bandwagon to join the rally in US stocks, there are still other ways available to invest in the US market. Investors who wish to put their money into US stocks can either open an international trading account and buy stocks directly.

Indian investors could open an international trading account through traditional Indian brokerages such as ICICI Direct, HDFC Securities, IIFL Securities, Kotak Securities and Axis Securities. These brokerages have collaborations with international platforms to offer investing abroad services to their local clients.

Newer apps such as Angel One, Vested and IND Money can also be used to open an international trading account.

Investors can also use International brokerages such as Interactive Brokers, Charles Schwab, Ameritrade, Stockal to open overseas trading accounts and trade directly.

Investors need to transfer money not more than $250,000 per year, which is the LRS limit to the US trading account.

The recent growth in demand for US stocks also reflects in the fact that mutual fund houses like Axis, ICICI, Mirae and Motilal held around 1.7 lakh shares in Nvidia, which are of $132 million in value. Even though investors can no longer take the ETF route, the availability to invest through other means should keep the doors to the US market open for Indian market enthusiasts.

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