Indian investors can invest directly on the NSE IFSC (NSE International Exchange) in US stocks such as Google, Amazon and Tesla starting today. NSE IFSC is a wholly owned subsidiary of the National Stock Exchange of India (NSE) and has received approval from the market regulator to establish an international exchange in GIFT – International Financial Service Center (IFSC) Gandhinagar.
The exchange allows trading in shares of companies incorporated outside India, depositary receipts, debt securities of eligible issuers, currencies, indices, interest rates and non-agricultural commodities derivatives. It is the exchange that will offer trading in the derivative.
The exchange has received approval to trade receipts from the top 50 U.S. stocks, including Apple, Alphabet, Amazon, Tesla, Microsoft, Morgan Stanley, Nike, P&G, Coca-Cola and Exxon Mobil. However, as of March 3, only eight will be available. These include Amazon, Apple, Alphabet (Google), Netflix, Tesla, Meta (Facebook), Walmart and Microsoft.
NSEIFSC Receipts: Equivalent to Owning a Share
To make US stocks accessible to Indians, market makers will buy US stocks and issue coupons against them, which will be known as NSEIFSC Receipts. They will be equivalent to owning an interest in the company of which they will have the receipt. You can buy or sell these coupons in the same way you would buy or sell shares of the companies.
However, if an investor owns one receipt, it does not convert into owning a share of the company. NSE IFSC said it will release the receipts in a certain proportion. For example, one share of Tesla equates to 100 NSE IFSC receipts. That means the value of Tesla’s receipt will be about one-hundredth of the value of Tesla stock.
Indian retail investors can transact on the NSE IFSC platform under the Liberalized Remittance Scheme (LRS) limits prescribed by the Reserve Bank of India. Currently, under LRS rules, a resident is allowed to transfer up to $2.5 lakh (USD 2.50.000) in any fiscal year.
The trading currency is US dollars and the minimum ticket size is $0.01. Trading starts on day one at 8:30 PM until 2:30 PM the following day.
Currently, the route to investing in US stocks is cumbersome and expensive. But it will be much easier now. In a note, Motilal Oswal said it will provide an additional investment opportunity for Indian investors with an easy investment process and at a low cost. You have the opportunity to trade in fractional quantity value compared to the underlying stocks traded in the US markets. Investors will be able to hold the depositary receipts in their own demat accounts opened in GIFT City and will be entitled to corporate action benefits in respect of the underlying shares.”
How to invest
According to Motilal Oswal, you must first open trading and demat accounts with NSE IFSC registered brokers. Currently 36 brokers are registered with the exchange. After that, you need to transfer money from your local bank account to the bank account of the NSE IFSC registered broker. Once the fund shows up in your broker’s account, you are ready to trade NSE IFSC US shares.
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