DH Deciphers | Investing in US stocks made easy - here's how

Investing in some of the marquee US stocks has become easier for resident Indians. On March 3, 2022, the NSE IFSC introduced trading in eight US stocks through unsponsored depository receipts. The product has got investors excited and has the potential to be revolutionary. Here's more on it:

Couldn't we invest in US stocks earlier?

We could but it was a long-winded process. The Reserve Bank of India (RBI) has something called the Liberalised Remittance Scheme (LRS) that allows you to invest up to $2,50,000 per annum in a foreign country. You could invest in stocks, real estate and a whole lot of other things. For trading in foreign stocks, you had to have an account with an Indian broker who has a tie-up with a licensed foreign broker. Or you had to directly open an account with a foreign brokerage. This was an expensive affair and discouraged most investors.

What is NSE IFSC?

NSE IFSC Limited (NSE International Exchange) is a fully-owned subsidiary of National Stock Exchange of India Limited and has established an international exchange in the Gujarat International Finance Tech City (GIFT), India’s first International Financial Services Centre (IFSC). Stock exchanges operating in the GIFT IFSC can offer trading in securities in any currency other than the Indian rupee.

How do I invest in US stocks through NSE IFSC?

You have to open a Demat or trading account in the GIFT City and use it to trade through the LRS route. Fund transfers will happen from your local bank account to the NSE IFSC-registered broker's account. The product is currently in the testing phase, and no more than 10,000 people can trade.

Since the shares of some of the marquee US companies cost hundreds of dollars each, you will be able to trade in their fractions, too. The trading window will be open from 8 pm to 2.30 am (Indian time).

Which US stocks are currently available for trading through NSE IFSC?

You can currently trade in the stocks of Alphabet, Amazon, Apple, Meta (Facebook), Microsoft, Netflix and Walmart. NSE IFSC will eventually raise this number to 50.

What is the settlement time for such transactions?

The settlement time is T+3, meaning the depository receipts will be credited to the Demat account after three days from the day of trade. Even for funds from the sale of these receipts, the settlement time is three days. No other transactions will be allowed until this transaction is fully executed. This means short trades will not be allowed either. And funds from the stock sale can be used only after three days.

What are unsponsored depository receipts?

When a company listed on a stock exchange in one country wants to attract investors through exchanges in another country, it has to do this through the depository receipt. When the company is directly involved in this, it's called the sponsored depository receipt. But if the company isn't directly involved, it's called the unsponsored depository receipt. For example, Apple is not directly involved in attracting traders in India, anyone looking to trade in its stocks will have to do it through the unsponsored depository receipt.

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