NSE and BSE to allow Indians to invest in foreign stocks
Last week both the NSE and BSE announced that they would soon be starting a platform through which Indians can invest easily in foreign stocks. The proposed platform would be set up at the International Financial Services Centre (IFSC) in Gujarat International Finance Tec-City (GIFT City) located near Ahmedabad.
NSE IFSC’s platform will permit investors to invest via UDRs. UDR stands for Unsponsored Depository Receipts. UDRs are issued without the involvement or consent of the foreign company. Also read Invest like Virat Kohli
They will be mirroring the price movements of the US stocks. Fractional shares would be offered and this would make it more affordable for retail investors.
Initially the top 50 US stocks by market capitalization and liquidity will be available for trading. However, the plan is to eventually expand this to top-200 to top-300 companies.
How to invest in foreign stocks via IFSC
1) Open an account with a broker registered with NSE IFSC in GIFT City. Complete the mandatory KYC (know-your-customer) process.
2) Remit funds through LRS option which has a limit of $250000. The amount cannot be used for trading or investing in derivatives products in the US.
3) Both depositories (CDSL and NSDL) have set up offices within IFSC and, hence, the entire buying, holding and trading cycle can happen within IFSC. Depositories will give a statement of holding.
4) The NSE arrangement will allow fractional ownership of US stocks where you can get a portion as small as a millionth of a high-value stock.
5) NSE IFSC’s clearing corporation will settle your trade and will also guarantee it. Further, the trades will be also be covered under NSE IFSC’s investor protection framework.
6) IFSC Authority (unified regulator for GIFT City) will be the regulator since it has facilitated this offering under the the regulatory sandbox.