With global markets in a recovery mode, more and more retail investors are looking to diversify their portfolios by investing in foreign equities. For instance, some quality large-cap stocks Google, Facebook, Tesla, Microsoft, Amazon, and Apple, among others are listed on Wall Street and buying these can allow Indian investors to diversify and seize bigger opportunities.
However, one can't just create an account and start trading in foreign equities, it has a more stringent set of rules. Here are a few ways you can buy a foreign stock.
NSE IFSC: The NSE International Exchange (NSE IFSC), a wholly-owned subsidiary of the National Stock Exchange (NSE), will soon introduce trading in select US stocks through its platform, it said on August 9. "The offering will be in the form of unsponsored depositary receipts. The entire trading, clearing, settlement and holding of US stocks will be under the regulatory structure of IFSC authority, stated the press release.
LRS Scheme: Indian investors can also use the government's remittance scheme (LRS) where domestic investors are allowed to invest $250,000 (around ₹2 crore) in countries without permission. These funds amount can be used for specific current account or capital account transactions, which include making equity and debt investment abroad.
Through domestic brokerages: A very easy way for a domestic investor is to open an overseas account with a domestic brokerage house. Brokerages like ICICI Direct, Reliance Money, Kotak Securities, Edelweiss, Invesco Mutual Fund, and various others provide the access to invest in foreign stocks. But one must remember that the terms and conditions for this service will vary depending on brokerages.
Investors can also look for stockbrokers who have a license to invest in both India and other countries like the US and can invest through them as well.
Through foreign brokerages: Some brokerages like Charles Schwab International Account, Interactive Brokers, TD Ameritrade provide an opportunity to Indians to open an account with them in order to trade in foreign equities. However, one must read the terms and conditions carefully and understand the fee structure before opening an account with any foreign brokerage.
Through Mutual Funds: One can also indirectly buy foreign stocks by purchasing mutual funds which invest in foreign stocks. Some fund houses have started such funds like Motilal Oswal S&P 500 Index Fund' which invests in 500 listed companies in the US. Other mutual funds like ICICI Pru US Bluechip Equity, Motilal Oswal NASDAQ 100 ETF, Edelweiss Greater China Equity Direct and various others also trade in global equities.
However, one must remember some risks and conditions while investing in foreign stocks, like high charges by brokerages. In the case of investing in US equities, one had to be ready to pay high charges to the brokerages in dollars. Another drawback is that the profits will always be subjected to currency exchange rates.