{"id":317514,"date":"2022-03-04T15:20:36","date_gmt":"2022-03-04T09:50:36","guid":{"rendered":"https:\/\/zerodha.com\/z-connect\/?p=317514"},"modified":"2024-02-02T13:51:17","modified_gmt":"2024-02-02T08:21:17","slug":"nse-ifsc-trading-us-stocks","status":"publish","type":"post","link":"https:\/\/zerodha.com\/z-connect\/general\/nse-ifsc-trading-us-stocks","title":{"rendered":"Investing in US stocks through NSE IFSC"},"content":{"rendered":"

NSE IFSC <\/span>recently announced<\/span><\/a> trading in 50 popular US stocks like Apple, Amazon, and Tesla in the form of unsponsored depository receipts for Indian investors. This has created a lot of buzz among investors who\u2019ve been looking for easy ways to get exposure to these stocks.<\/span> While the stock exchanges in GIFT City were primarily set up for easy access to Indian stocks and derivatives for NRIs and foreigners, this is the first product for onshore Indian\u00a0 investors.\u00a0<\/span><\/p>\n

Here\u2019s everything you need to know about it. <\/span>
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GIFT City IFSC\u00a0<\/span><\/h4>\n

GIFT city is a Special Economic Zone or a financial hub with tax incentives created by the Government of India with a more relaxed regulatory regime to attract foreign capital to India and export financial services. Think of an area like Singapore or Dubai within India. GIFT city International Financial Services Center (IFSC) is located near Ahmedabad in Gujarat. Read <\/span>more<\/span><\/a>. The regulator for GIFT city is the International Financial Services Centres Authority (IFSCA), <\/span>read more<\/span><\/a>.\u00a0<\/span><\/p>\n

NSE IFSC<\/span><\/h4>\n

Subsidiaries of BSE and NSE, India INX and NSE IFSC respectively, were allowed to set up stock exchanges at GIFT City. These exchanges were essentially set up to allow easier access for international investors looking to trade Indian securities. All trading and settlement happens in US Dollars, which helps avoid the impact of currency fluctuations.\u00a0<\/span><\/p>\n

The first products introduced on these exchanges were index and stock derivative contracts. Other than easier onboarding and lesser regulatory requirements for NRIs and foreign nationals compared to trading on onshore Indian exchanges, there are also tax incentives; no income tax on derivative gains, no STT, or Stamp Duty. This is to attract international traders to trade at GIFT over other platforms in Dubai, Singapore, and other countries. While only derivatives trading is allowed today, it is just a matter of time, now that the depositories have also started operations in GIFT, that trading of Indian stocks will also begin.\u00a0<\/span><\/p>\n

Can an Indian individual retail investor trade derivatives in GIFT city?\u00a0<\/span><\/h4>\n

No \ud83d\ude42<\/b> GIFT city is meant only for non-resident Indians and foreigners looking for India exposure. When an Indian investor transfers money to GIFT, it is treated as transferring money out of India using LRS (Liberalized Remittance Scheme). So a maximum of $250,000 per year, and more importantly, any money transferred using LRS can\u2019t be used for trading margin\u2019d products or derivatives. <\/span>Here is the RBI FAQ<\/span><\/a>\u2014check question 2 and point ii.\u00a0<\/span><\/p>\n

While both the exchanges were originally set up for foreigners and NRIs, they also realised that there is an opportunity to build a <\/span>product for Indian retail investors.\u00a0<\/b><\/p>\n

Launch of NSE IFSC receipts on US stocks<\/span><\/h4>\n

Over the last 4 years, technology stocks in the US have been on a tear. Companies like Amazon, Apple, Facebook, Google, and Netflix have given phenomenal returns. Added to the performance, these are also brands that a lot of Indians use on a daily basis. The interest in owning stocks of these companies under the LRS scheme has only gone up with time. While there have been a bunch of startups in India that have partnered with international brokers to make investing in these US stocks much easier, they haven\u2019t really taken off for the following reasons:\u00a0\u00a0<\/span><\/p>\n