If you are an investor in India looking to diversify your investment portfolio globally, you might be wondering if it’s possible to buy international stocks. The good news is that it is absolutely possible! In recent years, investing in foreign stocks has become much easier for Indian investors. In this blog, we will guide you through the process and methods of buying international stocks from India, along with the key regulations to keep in mind.
How Can Indian Investors Buy International Stocks?
There are a few methods available for Indian investors to purchase international stocks. Below are the most popular options:
- International Brokerage Accounts: One of the easiest ways to buy international stocks is by opening a brokerage account with a firm that allows Indian investors to trade in foreign markets. Platforms like Interactive Brokers, TD Ameritrade, and Charles Schwab offer access to U.S. stock markets and allow Indian investors to buy stocks listed on major global exchanges.
- Indian Brokers with Global Access: Many Indian stockbrokers now provide access to international stocks through their platforms. For example, popular Indian brokers such as Zerodha, Groww, and Upstox have partnered with global brokers to offer Indian investors the ability to buy U.S. and other international stocks without needing to open accounts with foreign brokers directly.
- Global Mutual Funds and ETFs: If you want to gain exposure to international stocks but don’t want to pick individual stocks, you can invest in global mutual funds or Exchange-Traded Funds (ETFs). These funds typically invest in foreign companies and provide a diversified way of investing in global markets.
Regulations for Indian Investors
Before you begin investing in international stocks, it’s important to understand the regulations surrounding foreign investments. Here’s a brief overview:
- Liberalized Remittance Scheme (LRS): The Reserve Bank of India (RBI) allows Indian residents to transfer up to $250,000 per financial year under the Liberalized Remittance Scheme (LRS). This money can be used to buy foreign stocks, bonds, or make other investments abroad.
- Taxation: Tax laws in India apply to income earned from international investments. If you earn capital gains or dividends from foreign stocks, you may have to pay tax on those earnings in India. Additionally, some foreign countries may also tax your income, so it’s essential to check if there’s a double taxation agreement (DTA) between India and the country where you are investing.
- Currency Risk: When investing in international stocks, you are exposed to currency risk. The value of the foreign currency against the Indian Rupee can fluctuate, affecting the value of your investment. A depreciating rupee could increase the returns in INR terms, while an appreciating rupee might reduce them.
Advantages of Investing in International Stocks
Investing in foreign stocks offers several benefits:
- Diversification: Investing in global markets allows you to diversify your portfolio. This reduces your dependency on the Indian economy and opens up opportunities in growing sectors and industries across the world.
- Exposure to High-Growth Companies: Many of the world’s top-performing companies are based in countries like the U.S. By investing in foreign stocks, you can gain exposure to successful companies like Apple, Amazon, and Microsoft, which have shown excellent growth potential over the years.
- Hedge Against Rupee Depreciation: Holding investments in foreign currencies can act as a hedge against the depreciation of the Indian Rupee. If the Indian Rupee weakens, the value of your international investments could increase when converted back to INR.
Risks of Buying International Stocks
While there are many benefits, investing in international stocks also involves some risks:
- Currency Risk: Fluctuations in currency exchange rates can impact your international investments. If the value of the foreign currency declines against the Indian Rupee, the value of your investment could decrease when converted back to INR.
- Market Volatility: Global markets can be volatile, and stock prices may be influenced by a variety of factors such as geopolitical events, economic cycles, and changes in interest rates. This volatility can impact the performance of international stocks.
- Legal and Regulatory Risks: Different countries have different regulations governing investments. When you invest in foreign stocks, you must comply with the legal and tax requirements of that country, which may vary significantly from India’s regulations.
Conclusion
Yes, Indian investors can buy international stocks through a variety of platforms, including international brokers, Indian brokers with global access, and mutual funds/ETFs. Understanding the regulations, taxes, and currency risks involved is essential for successful international investing. With proper research and strategic planning, you can diversify your portfolio and potentially benefit from high-growth international markets.
By Priya Sahu. Copyright research.
