Indian traders will soon buy and promote shares of different US-listed corporations through the NSE GIFT City arm. Indian investors will soon be able to buy and sell shares of Google, Amazon, Microsoft, and other US-listed companies through the NSE GIFT City arm in Gujarat’s International Financial Services Centre (IFSC).
How does it work?
The NSE International Exchange (NSE IFSC) on Monday, August 9, 2021, stated that it has set up an infrastructure for Indian investors to buy US stocks, and broker registration is underway.
This arrangement will enable fractional ownership of US stocks for these investors, who would wish to open De-mat accounts with entities primarily based in GIFT City.
Currently, Indian investors buy US stocks through designated online brokers with permission from US and Indian regulators.
These brokers enable ownership of up to one-millionth of a US stock.
The concept of fractional ownership is widespread and has been prevalent for racing horses, yachts, airplanes, and other high-value assets. Industry executives stated that recent tech innovations now allow such ownership in US shares too.
The entire trading, clearing, settlement, and holding of US stocks will be under the regulatory purview of the IFSC Authority, a launch from NSE IFSC mentioned.
The IFSC Authority has facilitated the offering under its regulatory sandbox.
In this place, they added that the fund transfers for buying would be through the Liberalized Remittance Scheme (LRS) of the RBI.
Presently, every Indian is allowed to remit up to $250,000 annually under the LRS.
However, the utilization of the funds remitted under LRS has certain restrictions, including that it can’t be used for leverage.
Hence, investors sending money overseas through this route cannot use the fund for investing or trading in any derivative product.
Perks that Followed
However, market players stated that investing in shares immediately, in exchange-traded funds (ETFs), fixed-income merchandise, and mutual funds are allowed.
In addition, NSE IFSC Clearing Corporation will undertake the clearing and settlement of all these trades in depository receipts and, in addition, will also provide settlement assurance.
Additionally, the company mentioned that these trades would be lined under NSE IFSC’s investor protection framework.
Speaking about the initiative, GIFT City MD & Group CEO Tapan Ray stated that the place was emerging as a financial gateway for investing in India and overseas.
“The ecosystem of international banks, international exchanges, and capital market intermediaries has been proliferating at GIFT City,” he said.
Ray believes that introducing this innovative product, which gave Indians a choice to invest in US stocks through GIFT City, was conceived at the right time.
“We have seen over some time that Indians have started investing in global stocks,” he added.