There are three main reasons why one may want to consider investing beyond Indian shores. First, there is the benefit of diversification- the option of being able to invest in some of the biggest and fastest-growing companies around the world. Second, a strong global currency ends up acting as a tailwind over longer periods of time. The US dollar for instance, has depreciated over 64 percent against the Indian rupee over the past decade. So, the value of your investment in USD increases that much more. Third possible reason - many a times global MNC giants listed in their home markets end up trading at a discount versus their Indian listed subsidiaries given the high valuations of the Indian market.
One can invest in global stocks either directly or via Indian mutual funds (MFs). Many asset management companies (AMCs) have set up fund of funds, which invest in markets all over the world- US equities being the biggest draw.
In fact, the quantum of money flowing into global fund of funds has more than quadrupled over the past one year from just under Rs 4,000 crore at the end of last June to nearly Rs 18,000 crore at the end of June 2021.
There is MF route and one can also buy and sell US stocks directly sitting here in India -- thanks to several Indian brokers tying up with Stockal and Vested -- two global digital investment players, which have the infra to connect a broker in the US with a broker here in India facilitating stock trading.
Stockal, in fact, puts it beautifully. They say, “We think of ourselves as a digital infra company building pipes from source markets where investors reside to destination markets where the investing products are.”
How it works
Indian brokers having tie-ups with these digital investment platforms let one set up a trading account. Then one can use the platform to buy up to $250,000 worth of US stocks a year as allowed under the Liberalised Remittance Scheme (LRS).
According to Indian law, Capital gains from these investments are taxed in India and also as per the US law, dividends on these US shares are taxed.
Stockal has a tie-up with several Indian brokers including IIFL Securities, HDFC Securities, Motilal Oswal, Scripbox and Geojit.
Vested meanwhile has a tie-up with Axis Direct, Angel Broking, Kuvera and 5Paisa.
But here's the biggest twist in the tale! NSE has now announced its intent to allow trading in the US stocks via the International Finance Centre or Gift City in Gujarat. The biggest difference here will be that instead of trading the actual underlying share, NSE will facilitate trading in depository receipts or DRS of US stocks.
The exchange is also looking to allow fractional ownership of stocks meaning you don't need to buy the full share for its whole price, but you can buy a part of it in smaller denominations. NSE plans to start with a fixed list of nearly 50 US stocks. It then will look to expand its offerings to include shares from other global markets as well.
Whether via MFs, or existing LRS enabled digital platforms or NSE's soon to be launched Gift City foray, one thing is for sure - trading and investing in global stocks is sure to pick up in a big way in India coming months.
Gaurav Rastogi, founder and CEO of Kuvera.In; Radhika Gupta, MD and CEO of Edelweiss Asset Management; and Sitashwa Srivastava, co-CEO and co-founder of Stockal, discussed this further.
“It is good that the awareness of the international investing has risen so much. Any route is a good route but the awareness is fantastic. Opening up of this idea, opening up people’s minds to investing abroad is a very good thing. I also think that people are investing abroad for the right reasons. The reasons are structural, people are looking at diversification, currency. People are also understanding these markets because they understand the companies and the products,” said Gupta.
“We have seen this as a beginning of a long-term trend,” said Srivastava.
“It is a structural trend. People are realising and accepting the fact that investing abroad is an option they have outside of MFs,” Rastogi mentioned.
For the entire conversation, watch the accompanying video.