Explained | How to trade in US shares on NSE IFSC and which are stocks you can buy?

Investing in US stocks from India has now become easier. NSE International Exchange (NSE IFSC), a wholly-owned subsidiary of the National Stock Exchange of India Ltd (NSE), has announced that trading in select US stocks has been facilitated through its platform.

NSE IFSC is an international exchange based in the International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City (GIFT City).

Which stocks can you buy?

As on date, you can invest in 50 stocks, including Amazon, Apple, Microsoft, Alphabet (Google), Netflix, Meta (Facebook), Walmart, and Tesla. Besides using the products and services of these US giants, you can also be a part owner through equity participation.

As an investor, you will be provided with an NSE IFSC receipt as proof of ownership of the stocks.

The receipt is a negotiable financial instrument in the nature of a “depository receipt”, which gives the holder a proportionate beneficial interest in the underlying shares.

HDFC Bank IBU, solely in its capacity as the NSE IFSC Receipts Custodian, will be creating and issuing the receipts. The settlement of funds and NSE IFSC receipts will follow a T+3 cycle.

To buy one share of Amazon listed abroad, which is trading at around $3030, you need to invest over Rs 2 lakh. However, that may not be required, as NSE IFSC allows fractional ownership.

Though NSE IFSC is not the only one allowing fractional ownership of US stocks, it does add to the advantages of investing in US stocks through NSE IFSC.

Also read: How to trade in US Stocks on NSE IFSC: A ready reckoner

What kind of paperwork is needed?

In addition to the KYC formalities, an Indian investor has to meet criteria set by the Reserve Bank of India (RBI) regarding the purchase of dollars to invest in US stocks.

You will have to buy dollars from your Indian bank account adhering to the Liberalised Remittance Scheme (LRS) limits prescribed by the RBI.

Any resident individual, including a minor (countersigned by a guardian), is allowed to remit up to $2.5 lakh in each financial year. At an exchange rate of Rs 76 to a dollar, it is about Rs 1.90 crore.

The shares where Indians can invest through NSE GIFT city platform must be in the S&P 500 index and must have been listed on the NYSE or NASDAQ for at least 12 months.

Any other shares as may be agreed mutually between NSE IFSC receipts, custodian and NSE IFSC may also be made available.

Also read: 8 US stocks to start trading on NSE IFSC in GIFT City from March 3

Should you invest?

Access to S&P 500 stocks will become simpler and give an opportunity to Indian investors to diversify their portfolios.

There are international equity mutual funds and ETFs, available in India that also provide access to US stocks. However, at present these funds have suspended fresh subscriptions as the limit set by the regulator for overseas investments by Indian mutual funds is likely to reach its threshold of $7 billion.

Investing in the US market will bring in the necessary geographical diversification required for your investment portfolio but before diving in, see if you are adequately diversified across the Indian stock market.