Indians can now invest in international stocks through NSE IFSC
Gujarat's Gift City has opened a window for Indians to invest in international stocks. Find out more about NSE's International Financial Service Centre (IFSC) which is allowing trade in US stocks
)
Most of the leading foreign universities have set up campuses in other countries.
NSE-owned IFSC is located in Gujarat’s GIFT City, which is India’s first International Financial Services Centre (IFSC). Stock exchanges operating in the GIFT City are permitted to offer trading in securities in any currency other than the Indian rupee.
From March 3, NSE IFSC launched trading in eight US stocks like Alphabet, Amazon, Tesla, Microsoft and Netflix in the form of unsponsored depositary receipts. It will be later increased to 50 in a phased manner.
The trading, clearing, settlement and holding of US Stocks will be under the regulatory structure of IFSC Authority. Currently, the product is under regulatory sandbox for a period of nine months. The number of investors that can be on-boarded during the sandbox testing phase is limited to a maximum of 10,000.
Investors will be able to hold the depository receipts in their own demat accounts opened in GIFT City. They will be able to transact on the NSE IFSC platform under the Liberalised Remittance Scheme (LRS) limits prescribed by the Reserve Bank of India (RBI).
LRS allows Indian individuals to freely remit funds up to $250,000 outside India in a financial year. An NSE IFSC Receipt is issued by HDFC Bank’s International Banking Unit in its capacity as the NSE IFSC Receipts Custodian on the basis of underlying securities issued by a U.S. listed company.
The receipts are not sponsored by the underlying companies. They are unsponsored, meaning the receipts are created without the involvement, participation, or consent of such US-listed companies or of the US exchanges on which such underlying securities are listed.
Also Read
The receipts give the holder a proportionate beneficial interest in the underlying security itself. Their issuance is based on the underlying share to IFSC Receipt ratio as defined by the NSE IFSC from time to time.
Therefore, an NSE IFSC Receipt represents a fraction of an underlying share, making it affordable for the investor to participate. For instance, one Amazon share that costs about $2900 is converted into 200 IFSC receipts worth about $15 each. The ratio is reviewed from time to time.
The receipts are issued and traded in US dollars, and any amount paid by the NSE IFSC Receipts Custodian in connection with the receipts will be paid in US dollars.
The underlying securities are held by the US Custodian on the instructions of NSE IFSC Receipts Custodian. The NSE IFSC Receipts are issued by NSE IFSC Receipts Custodian based on the deposit of Underlying shares with the US custodian. One can buy NSE IFSC US Stock the same way they buy other Indian securities.
Firstly, the investor has to open a trading and demat account with any of the NSE IFSC registered brokers. Then, they are required to transfer funds from their local bank account to the NSE IFSC-registered broker’s bank account. Once the funds reflect in the broker's account, the investor is ready to trade in NSE IFSC US Stocks.
All investors would be eligible for corporate actions such as dividend and bonus issues. The settlement of funds and NSE IFSC Receipts will follow a T+3 cycle, which means the depository receipts are credited to the demat account after three days from the day of trade. Funds from sale of receipts will also get credited after 3 days.
Some of the charges levied on the investor include brokerage charges, exchange transaction charges, receipt issuance fee and demat account charges. An investor can also request the conversion of NSE IFSC Receipts into the underlying share. The investor has to submit a cancellation request to take delivery of the underlying shares in a US brokerage account.
More From This Section
Don't miss the most important news and views of the day. Get them on our Telegram channel
First Published: Mar 08 2022 | 8:45 AM IST