Through the NSE’s GIFT City branch in the International Financial Services Centre (IFSC) in Gujarat, Indian investors will soon be able to purchase and sell shares of US-listed companies.
On Monday, NSE IFSC announced that it has set up infrastructure allowing Indian investors to buy US stocks, and that broker registration is in the works. These investors will be able to own fractional shares of US stocks through the arrangement, which will require them to open demat accounts with businesses domiciled in GIFT City.
Indian investors currently purchase US equities through designated agents who have received approval from both foreign and domestic regulators. Such agents allow you to own a millionth of a share of a foreign stock. Fractional ownership is a common notion for high-value assets such as racehorses, yachts, planes, and other high-value assets. Recent technological advancements now allow such ownership of US stocks as well.
According to a press release from the NSE IFSC, the IFSC Authority will regulate all US stock trading, clearing, settlement, and holding. The IFSC Authority has permitted the offering under its regulatory sandbox, according to which fund transfers for buying will be made through the RBI’s Liberalised Remittance Scheme (LRS).
Under the LRS, every Indian is currently allowed to remit up to $250,000 each year. However, there are several constraints on how the funds sent through LRS can be used, notably the fact that they cannot be leveraged. As a result, investors moving money abroad via this means are unable to invest in or trade in any derivatives products through the fund.
Market participants claimed that investing directly in stocks, exchange-traded funds (ETFs), fixed-income instruments, and mutual funds is permitted. All of these trades in depository receipts will be cleared and settled by NSE IFSC, which will also provide settlement assurance. These trades will also be protected by the NSE IFSC’s investor protection system.
Tapan Ray, GIFT City MD and group CEO, said the project was transforming the city into the country’s financial gateway for investing in India and overseas. “At GIFT City, the ecosystem of international banks, international exchanges, and capital market intermediaries is quickly growing,” he explained.
Ray believes that launching this new offering, which allowed Indians to invest in US stocks via GIFT City, came at the appropriate time. “We have noticed that Indians have begun to invest in global stocks over time,” he remarked.
When it comes to Indian enterprises, their market is primarily limited to the domestic economy, despite the fact that exports account for a significant amount of their earnings. In comparison, certain US companies have a greater potential for their stockholders. Many of the publicly traded corporations in the United States serve a huge worldwide market and are market leaders in their fields. In comparison to Indian companies, this provides huge growth prospects and significant scaling.
The future will belong to the more innovative and technologically advanced enterprises. Indian investors should seize the unique chances, selecting US stocks present to them as they arise. In terms of technology and business methods, US-listed corporations are well ahead. Many of these are at the cutting edge of space, military, computer engineering, robotics, and other fields. The US economy has a thriving Private Equity and Venture Capital sector, which allows companies to raise funds and list on stock markets ahead of schedule.
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