When it comes to regional diversification, the US stock market is one of the popular locations to invest. The country is home to some of the most successful technology and wealth-creating firms in the world, making for fantastic investment opportunities. Furthermore, considering the lack of a link between the Indian and US equities markets, it is an intriguing proposal. Most of us would intuitively prefer to invest in US stocks from India. Most of us would intuitively prefer to invest in US stocks from India.
The United States, being the world’s largest economy by GDP, is home to several of the world’s largest financial markets. The United States, for example, controls by far the majority of the world’s stock markets, accounting for more than half of its total value. The New York Stock Exchange (NYSE) and the Nasdaq are by far the world’s largest stock exchanges in terms of total market capitalization. In 2022, US stock markets roughly account for nearly 60% of global stock markets.
Additionally, most foreign exchange reserves are in dollars. According to the International Monetary Fund, the dollar accounts for 59% of global reserves, much above the euro’s 20.5% share. Investing in US stock from India can turn out to be a lucrative offer, however, how to buy US stocks in India?
Why should you invest in the US Stock Markets?
- Reap the benefits of a growing US Economy:
Many big blue chip businesses are listed on US stock markets, giving investors access to trillion-dollar behemoths which include Alphabet, Amazon, and Meta, among others. While there are Indian blue-chip behemoths like Infosys listed in the US stock markets, the sheer scale of US companies makes them drastically more appealing.
Aside from American firms like Tesla, Google, and Apple, which are technologically much better than the majority of other companies in the world in their sectors, US stock exchanges not only offer the best of American firms they also take into account Chinese, Japanese, and European enterprises like Alibaba, JD.com, Softbank and NXP Semiconductors.
There is no other financial market in the world that is as huge, accessible, transparent, or liquid as the one in the United States. Because of its transaction volume, market size, and several listed firms, this market offers foreign investors a one-of-a-kind investment opportunity.
- Better capitalization:
The United States’ stock markets have the highest single concentration of wealth in history. The New York Stock Exchange and NASDAQ comprise the world’s largest financial market.
- Enhanced liquidity
- Profits from the US Dollar’s appreciation
The Indian rupee has been decreasing against the US dollar in recent years, and this trend is projected to continue.
Your earnings from overseas equities are affected by the rupee-to-dollar exchange rate. Any rupee depreciation helps to enhance profitability if the value of dollar-denominated assets such as US equities rises. Even if global markets fail or remain steady, a decline in the rupee vs the USD will benefit you. Consider investing in US markets to preserve your cash from the fall of the Indian rupee.
The US dollar is the world’s reserve currency, and it is expected to outperform most other currencies for the foreseeable future.
- Portfolio diversification:
Companies worldwide are represented on all of the main US stock markets, making it a popular investment location. Investing in the NYSE allows you to diversify your financial portfolio while also investing in worldwide organisations. In contrast, Indian companies dominate Indian indices. Even small unrest in the country might lead the indices to fall. The US stock market is varied, and it has proved to be robust in the face of adversity. However, in the case of India, this is not the case.
American businesses looking for capital have access to a diverse range of markets in the United States. You may invest in huge organisations and global brands whose shares are listed here, with more than 5,500 corporations to choose from.
When it comes to investing, diversification is a topic that is constantly discussed. While it often refers to distributing your money among multiple asset classes, regional variety is also a significant consideration. Within the asset classes that are available in India, it is possible to diversify an investment portfolio; nevertheless, regional diversification lowers the risks that the Indian market alone carries.
- Exposure to innovation:
Despite having one of the world’s fastest-growing economies, India lacks some of the world’s most powerful enterprises. As a result, most of the opportunities for wealth creation that occur from the growth of such firms are restricted to local investors. The majority of global firms, notably those in cutting-edge technology and consumer internet/electronics, are listed on US stock exchanges. These marketplaces may also connect you with next-generation innovation-led enterprises in fields such as electric/autonomous vehicles (EV/AV), AI & ML (Artificial Intelligence & Machine Learning), robotics, and biomedical/pharma. Furthermore, the United States is home to many of the world’s leading consumer, financial, and services firms.
How to invest in US Stocks from India?
From Microsoft Word, MacBooks, iPhones, and social media platforms such as Facebook and Instagram to our favourite fast-food outlets such as McDonald’s, Burger King, Starbucks, and others, US brands have progressively become a part of our everyday lives in India. But did you know that you may get a portion of your favourite American companies in India by investing in US stocks?
Now, it is possible for Indian investors to invest in US stock from India. They can invest in the S&P 500, Dow Jones, Nasdaq, or other US-listed corporations if they wish to diversify beyond Indian stocks and financial instruments, such as the Sensex or the Nifty 50. Indian investors can invest in US shares or ETFs under the Reserve Bank of India’s Liberalized Remittance Scheme (LRS).
Under the above scheme, residents can remit money upto $250,000 for various purposes like education, medical use, purchasing shares, and can also open and hold foreign currency accounts with foreign banks.
Let us now learn how to invest in US stocks from India:
- Direct Investment :
- Via Investment Apps
Since the advent of mobile applications for a wide range of services, numerous start-ups have developed apps such as Stockal to let Indian investors engage in the US stock market. Some of these programmes may not allow intraday trading in the US market from India due to regulatory limits.
You don’t need a substantial sum of money to invest in major stocks like Facebook (Meta), Apple, Amazon, Netflix, and Google since you can now utilise fractional investing. It allows you purchase a part of a share for as low as $1. Investing in the world’s most valuable firms is no longer a pipe dream.
- Via US-related brokerage accounts:
To trade in US equities via direct investing and LRS, you must first open a trading account with a foreign or Indian broker. You do not need a US-based address or citizenship to open a trading account with a US brokerage firm and trade on the US stock exchange.
Many local brokers collaborate with US stockbrokers. They serve as intermediaries and complete your transactions. You may open an international trading account with any of these firms. Opening this account is simple and you’ll to provide a few documents and then you are set.
You may also create an offshore trading account with a platform like Stockal. Before creating an account, be sure you understand the fees and charges.
- Indirect Investment
Direct stock investment requires a certain amount of ability and may result in investor losses. You may, however, try exchange-traded funds (ETFs), which provide you instant access to a large number of US stocks. You may also acquire exposure to certain industries, such as healthcare or energy, by investing in an exchange-traded fund (ETF) that tracks these sectors rather than individual firms.
Indians are growing interested in theme-based ETFs, which, rather than investing in specific sectors, focus on developing concerns such as power, e – mobility, cloud services, transportation, or even worldwide ETFs that provide broadly diversified exposure to the United States.
ETFs have a lower expense ratio (the proportion of assets spent on administrative and other operational expenses) than actively managed mutual funds since they are passively managed.
These are stock and ETF baskets in which you may invest with just one click. This strategy was developed in collaboration with hedge funds, global asset management businesses, seasoned wealth management firms, and portfolio managers. You may diversify your holdings with a single click and no more research. It is created by investment professionals via rigorous study and financial analysis, and it is continually rebalanced to ensure alignment with goals and benchmarks.
The US Tech Bluechip Stack for example, invests in pure technology internet firms that have market-leading competitive advantages (MOATs).
- US Focused-Indian Mutual Funds
You can also invest in mutual funds that have exposure to US stocks. Mutual funds provide benefits such as geographical and portfolio diversity, but they also carry their own set of risks and rewards. The fund’s overall performance may be impacted by fluctuations in the country’s market as well as volatility in the exchange sectors. Furthermore, these funds are subject to ongoing fees as well as expenses related to the worldwide plan in which they are invested.
What are the things to watch out for before you invest in US stocks from India?
This might range between 0 and 1000 rupees + GST. It is influenced by two variables.
One – Is the investing platform/app/broker linked with any Indian banks? There are no fees or charges applied when you add money to your Stockal account. However, your bank may charge fees for international external remittance fees. It would be advisable for you to get in touch with your bank or go into your NetBanking account to check the bank fees.
Two – If you transfer directly and there is no specific agreement between the bank and the broker, you may be charged a remittance fee ranging from Rs. 1000 + GST (Fixed) to 0.8 per cent of the transferred money.
There are no fees or charges applied when you add money to your Stockal account. However, your bank may charge fees for international external remittance fees. It would be advisable for you to get in touch with your bank or go into your NetBanking account to check the bank fees.
Since you’ll be investing in the US and transferring profits and dividends to India, you must be familiar with the tax laws of both countries. Changes in tax policy may also have an impact on your assets.
In the United States, your investments are subject to a 25% flat tax. However, India and the United States have the Treaty to Avoid Double Taxation (DTAA). This can be used to compensate for Indian taxes.
LTCG refers to stocks held for more than one year in India, whereas STCG refers to stocks held for less than one year. The interest rates charged are determined by the investor’s tax bracket.
- Investment Limits
An Indian resident investing in the United States can buy stocks through an authorised financial partner while remaining within the yearly limit of $250,000. All foreign remittances over INR 7 lakh in a fiscal year will be subject to a 5% source tax under the new tax legislation (TCS).
How does Stockal make your investment journey smoother?
- Curated portfolio stacks
It takes time and works to ensure that your portfolio is varied and lucrative. Stockal’s stacks reduce the need to study several papers and speak with numerous experts. So you can relax and let your money work for you.
- Thematic ETFs
Stacks are pre-configured collections of stocks and ETFs that may be purchased with a single click. Stockal claims to solve the dilemma of what to invest in by curating ready-made portfolios centred on an idea or theme.
- Easy money transfer process and easy to track
You may quickly and easily replenish your Stockal account. Go to your Homepage, select “Funds,” and then click “Add funds.” Enter the amount to be sent to your brokerage account. For the initial money transfer, you will be able to submit your bank details, which will be used as the default for all subsequent payments.
Account settlement takes T+2 business days on average. As a result of the selling earnings, you will observe unsettled cash in your account balance. Cash that has not been settled will be displayed in the ‘Cash Settlement’ area until it is transferred to your account.
- Ability to buy fractional shares
Investors in the United States can hold fractions of stocks, which distinguishes them from markets in other nations. For example, you may own 0.05 or 0.015 shares of Apple. Stockal allows you to own as few as 0.0001 shares of any stock. This is beneficial for two reasons:
- You do not need to research “how many shares should I buy?” Simply enter the amount of money you wish to invest, and the number of units will be computed and sent into your account immediately. For example, if you invest $100 in a $170 company, you will obtain 0.59 shares.
- Many well-known American equities are more costly than the majority of Indian stocks. As a result, if you want to acquire stock in a well-known company, you must invest a significant amount of money. If you want to buy Tesla stock, it is now trading at $ 832.27, equivalent to 66,300. 42 Indian rupees. That’s a lot of money to spend, but you can buy some shares with the money you have as an investor.
Frequently asked questions:
- What are the major exchanges in the US?
The American Stock Exchange (AMEX), the New York Stock Exchange (NYSE), and the National Association of Securities Dealers (NASDAQ) are examples of major American stock exchanges.
- Can Indians invest in US stocks from India?
YES! Under the Liberalised Remittance Scheme, the Reserve Bank of India (RBI) allows an Indian citizen to invest up to USD $250,000 per year in overseas markets (LRS).