Question submitted by Madhusudhan - 10, Sep 2014

International Investing

I would like to know if I am in India can I invest in US stocks directly and if so how can I proceed and will the investment be in the currency conversion rate considered

Harish - answered the above question

  • Harish (11, Sep 2014):
    I know for sure that ICICIDirect allowed overseas trading (US Market) some years back after RBI allowed Indians to invest in foreign markets ( only investments and no speculation) and has set upper limit on amount Under the Liberalized Remittance Scheme.Now a days not seeing this feature in ICICIDIRECT portal and not sure whether ICICIDIRECT still supports overseas trading. You can contact Kotak Securities,India Infoline, Reliance Money and Religare and check about overseas trading account and charges involved.
    
    Overseas trading account opening was allowed only for retail traders and not corporate, partnership firms, HUF, Trusts, and NRIs. Trading in Equities, Exchange Traded Funds, Stock Options and Index Options were supported. I guess as per RBI rules futures trading and trading on margin not allowed. Before trading you need to remit the money and exchange rate would be decided based on the remittance day. Please note that in US settlement cycle is T+3 unlike India which is T+2.
    
    Under the Liberalized Remittance Scheme of RBI the limit on overseas investment by a retail investor was reduced to $75,000 compared to $200000 earlier. You need to look into RBI's website for the latest limit on remittance. Right now this limit might be around $125000.
    
    Under this scheme you can also buy debt instruments or any other assets including property outside India, without prior approval of the Reserve Bank.
    
    Got the following info from RBI website:
    
    The remittance facility under the Scheme is not available for the following:
    
    i) Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000;
    
    ii) Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty;
    
    iii) Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market;
    
    iv) Remittance for trading in foreign exchange abroad;
    
    v) Remittances directly or indirectly to Bhutan, Nepal, Mauritius and Pakistan;
    
    vi) Remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories”, from time to time; and
    
    vii) Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.
    
    If your sole aim is to participate in broad based US stock market you can buy S&P500 & 	DJIA futures from NSE only without all the headache of remittance.
    
    Also note that your net profit or loss on realization would be decided on the currency movements.