Capital markets regulator Sebi has recently lifted restrictions on mutual fund houses that prevented them from taking fresh subscription to invest in overseas funds. Soon after, some AMC (asset management companies) started to accept fresh inflows such as Edelweiss.
The overall industry limit of investment in global stocks continues to be $7 billion and $1 billion for one fund house, the fresh subscriptions are expected to stay diminutive given the small elbow room created in wake of redemptions and decline in stock prices.
As a result, investors in India can explore some other alternatives to invest in global equities. Among a slew of options, retail investors can choose to go for LRS (liberalised remittance scheme) that enables them to remit up to $2,50,000 in one financial year.
LRS Route
Some of the LRS proponents argue that it is a good way to buy foreign equity because it spares investors the risk of currency depreciation.
However, not everyone thinks that it is a better way to invest in global equities.
“We believe for smaller investors; it is better to invest through mutual funds investing in the global ETFs rather than using the LRS window. These funds offer diversified exposure and high liquidity with ease of execution,” says Vaibhav Porwal, Co-founder, Dezerv.
Aside from this, there are some investment platforms such as Interactive Brokers and Saxo that offer this route to investors.
Interactive Brokers enable retail investors to trade in over 90 worldwide markets and investor must have $500 required to subscribe to maintain market date data and research subscriptions.
GIFT City and BSE
There are a few other ways as well to invest in global stocks through National Stock Exchange's IFSC in Gift City.
"Currently, we offer investors access to the 50 top stocks in the US but will expand our offerings soon," said Ravi Varanasi, group president, NSE said in a statement.
The Gift city enables investment in overseas stocks through depository receipt (DR) programme. All these receipts are held in the Gift City depository in the investors' name, making it a safe and secure way to buy the stocks of US companies.
There is another way that is facilitated by BSE’s India International Exchange via its special purpose vehicle: INX Global Access.
However, wealth advisors say that investors must be careful while filing returns if they are invested into overseas stocks as they need to disclose capital gains, losses and even any income that they earn from those stocks in form of dividend.
Sundry expenses
Following investing pattern of domestic investment in case of overseas stocks may not be feasible. This is because of sundry expenses that one has to bear including exchange rate difference and transaction fee.
For instance, it is perfectly viable to invest in domestic equity funds via SIPs — the same approach will not work in case of global equities because of these expenses.
These costs are one reason that only investors with deep pockets are advised to go via LRS route.
So, in case your risk appetite is small and the amount you want to invest is also not considerable, the better alternative to get exposure to foreign equity is through mutual funds that invest in overseas ETFs.