4. Who can buy?
5. How much can we buy?
6. What benefits?
7. Exchange timings & modalities?
8. Any risks?
Ever heard of FAANG, Metaverse Stocks & a whole host of stocks that seem so promising but yet so out of reach. Within this global village, information is traveling at a speed of light, so are our expectations from our PF.
There has been a rage in people to invest globally via indirect means as directly investing in US Stocks has been cumbersome & mostly people feel that unease of dealing with currency conversion & taxation.
But now NSE through its subsidiary exchange is making things simpler.
Let's dive in to understand more:-
1. What is this all about?
NSE IFSC (NSE International Exchange) incorporated on Nov 29, 2016, is a wholly-owned subsidiary of NSE.
This exchange located at GIFT City (Gujarat International Finance Tech City) will facilitate trading & investing in US Stocks from March 3, 2022. Till now Indian investors used to remit funds & buy stocks that were held in the US only with registered brokers.
Whereas now investors will be given NSE IFSC Receipts. These receipts are derivatives having the stock as an underlying. Investors can directly buy & sell these receipts in India through the NSE IFSC exchange.
These will be treated as foreign assets & short term capital gains (before 1 year) will be taxed at slab rates & long term (beyond 1 year) will be taxed at 20% with indexation.
2. What can we buy?
As of today, a total of 50 stocks from the USA have been approved for listing on NSE IFSC Exchange. A list of all 50 stocks with their depository receipt ratio is attached below.
A receipt holder will have proportionate beneficial interest in the underlying share, ratio can expressed as 1:N (eg 1:100, 1 share of Tesla for 100 receipts). This facilitates fractional ownership too, making it more lucrative for retail investors.
PS: on the 1st day only 8 shares will be listed (Amazon, Tesla, Alphabet, Meta, Microsoft, Netflix, Apple & Walmart), others will be added later.
3. How can we buy?
NSE IFSC has listed the trading members or brokers. All an investor needs to do is open a trading & Demat account with such broker & transfer funds using a regular bank account into the broker's bank account.
Once the funds get reflected in the broker's bank account, Voila! You are all set to buy into the world of FAANG & Metaverse. You can find the list of brokers below.
You might be bummed that many big names like Zerodha & Angel One are missing. But we feel as investor interest picks up, all major brokers will be on the panel soon.
4. Who can buy?
Person residing out of India, Non-Resident Indians & Individual Residents in India who is eligible under FEMA to invest funds offshore, to the extent allowed in the LRS scheme of RBI.
However, US & Canadian residents are not allowed to invest through this instrument. This is a big leg up for Indian retail interested in US Stocks as there are very few formalities involved.
5. How much can we buy?
The LRS ( Liberalized Remittance Scheme) of RBI prescribes a limit of $250,000 (~₹1.9 cr). An investor can buy, sell, trade in the depository receipts but needs to stay within the limits of LRS.
The limit is pretty handsome considering the caps of retail participants as per SEBI is under ₹2 lakhs. This is a very good opportunity for people looking to buy and hold quality US stocks.
6. What benefits?
The first & foremost benefit is that now an investor can hold these receipts in their own demat accounts just like they hold stocks of Indian companies. This gives a great sense of security.
These depository receipts will be entitled to all benefits of corporate actions like splits, bonus, buybacks & dividends. So if you were looking to invest in US Stocks this clearly is a win win situation that is pretty handy too.
PS: voluntary corp actions like rights, voting etc won’t be passed on.
7. Exchange timings & modalities?
Trading at NSE IFSC will begin at 8 pm day 1 & end at 2.30 am day 2, so one trading session will have 2 dates in India. This is in accordance with trade timings of US markets, which makes sense.
Trading currency will be US$ with $0.01 tick size. There will be no price bands as we have in Indian stocks but dynamic bands will be there at 10%, which can be relaxed (as we have in F&O & underlying stocks).
Intraday trades are allowed but short selling is not. So one must square off trades or sell their existing positions only. Settlement shall be done by NSE IFSC Clearing Corporation Ltd (NICCL) on T+3 day. Trades done on Monday will be settled on Thursday.
Exchange holidays are in accordance with US Market holidays, few Indian holidays will be observed too. You can find the schedule of charges that a receipt custodian can charge a receipt holder below.
8. Any risks?
As with any financial asset, risk of price & volatility always remains. One must be well versed with these risks whenever committing to such instruments. One more risk that may be dynamic in nature is liquidity.
As this is a brand new segment the interest & participation can only be judged as time lapses. So tread with caution & know what you are doing. As Warren Buffet says “Risk comes from not knowing what you are doing”.
