Indian investors will soon be able to buy and sell shares of Google, Amazon, Microsoft and other US-listed companies through NSE’s GIFT City arm in the International Financial Services Centre (IFSC) in Gujarat.
NSE International Exchange (NSE IFSC) on Monday said it has set up infrastructure for Indian investors to buy US stocks and broker registration is under way. The arrangement will allow fractional ownership of US stocks for these investors, who would need to open demat accounts with entities based in GIFT City.
Currently, Indian investors buy US stocks through designated online brokers who have the permission from US and Indian regulators. These brokers allow ownership of up to one-millionth of a US stock. The concept of fractional ownership is popular has been prevalent for racing horses, yachts, aeroplanes and other high-value assets. Recent tech innovations now allow such ownership in US shares too, industry executives said.
The entire trading, clearing settlement and holding of US stocks will be under the regulatory purview of the IFSC Authority, a release from NSE FSC said, IFSC Authority has facilitated the offering under its regulatory sandbox where the fund transfers for buying will be through the Liberalised Remittance Scheme (LRS) of the RBI, it said.
At present, every Indian is allowed to remit up to $250,000 annually under the LRS. However, the usage of the funds remitted under LRS has certain restrictions, including that it cannot be used for leveraging. Hence, investors sending money abroad through this route cannot use the fund for investing or trading in any derivatives product.
However, investing in stocks directly, in exchange-traded funds (ETFS), fixed-income products and mutual funds is allowed, market players said.
NSE IFSC Clearing Corporation will undertake clearing and settlement of all these trades in depository receipts and also provide settlement guarantee. Additionally, these trades will be covered under NSE IFSC’s investor protection framework, the company said.
Speaking about the initiative, GIFT City MD & group CEO Tapan Ray said the place was emerging as a financial gateway of a country for investing in India and abroad.
“The ecosystem of international banks, international exchanges and capital market intermediaries has been growing rapidly at GIFT City,” he said.
Ray believes that introducing this innovative product, which gave Indians the option to invest in US stocks through GIFT City, was conceived at the right time. “We have seen over a period of time that Indians have started investing in global stocks, he said.