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How can an Indian investor buy shares of a foreign company? Certain things look a little complicated till they are done for the first time. Investing in stocks of foreign companies, like Apple, Google or Facebook, is one of those. It seems very complicated but it is not so. A few days back Manshu had written a post on how NRIs can invest in the Indian stock market.
CA Karan Batra wanted to have a similar post on how Indians can invest in shares listed on NYSE. Shares listed on the New York Stock Exchange. I heard that its possible for Indians to invest in Shares listed on NYSE but not sure about how to invest. Some investors in an attempt to diversify their portfolios do not mind to experiment and desire to have information regarding the procedure. So, here is my attempt to share the required information with our readers.
Like you open a trading account here in India with a broking company to invest in shares listed on NSE or BSE or any other stock exchange, you are required to follow a similar process to open a trading account with an Indian broking house to invest in shares of some foreign companies listed on the stock exchanges of their respective countries. How do I open a trading account to invest in International Capital Markets? To facilitate you to do the same, an Indian stock broker enters into a tie-up with a foreign broking partner who has the license to act as an intermediary and execute the trades on your behalf in the foreign markets. The Indian stock broker will act as an introducing intermediary between you and the foreign broking house. You just need to fill an application form and provide your identity proof such as passport or PAN card and residential address proof such as Voters ID card or latest bank statement as the documents required to open an account. Once your necessary details are registered, you will be provided the bank account details of the foreign broker to which funds are to be transferred.
You will also get the contact details of the account executive who will take care of your account in case you require any kind of assistance. Indian citizen can remit a maximum of USD 2,00,000 in a financial year, from any of the authorised banks in India, including for investments in international capital markets. Form A2 and submit it there along with your PAN card copy. The foreign brokers accept funds originating from your bank account only and will reject any third party fund transfer. Also, they do not accept bankers drafts, cheques or cash deposits either.
Once the payout request is acknowledged, the amount will be credited to your bank account. It takes around 24 to 48 hours to remit money from your bank account to your trading account with the foreign broker and around 48 to 72 hours from your trading account to your bank account. You may remit funds in one of the many global currencies from your bank account to your trading account but you need to decide the base currency in which you want to settle your transactions. So, if you set USD as the base currency in your account, then all stock exchanges which accept payments in USD will settle your transactions in USD automatically. For your trades on other exchanges, which do not accept payments in USD, the foreign broker will convert your base currency, USD in this case, to the currency of that exchange at the market rate to execute the transaction. Unlike with most Indian brokers, margin trading and short selling will not be allowed with a foreign broker. You will be able to buy shares only when there is sufficient cash in your account and sell shares only when you already hold them.
You can have the access to all your transactions, account history and ledger balance on the trading platform. You will also get the contract notes for your executed trades in your mailbox. Which brokers are providing this facility here in India? Only a few Indian broking companies like Kotak Securities, ICICI Direct, India Infoline, Reliance Money and Religare, are offering these trading services to Indian investors.