Investing in the stock market of India can be a complex process. Here I would discuss how a non-citizen can invest money in the financial markets.
I want to invest in India’s Stock market – is this something you keep saying to yourself?
Well, investing in the Indian Stock Market is really smart decision at the moment. I’m not telling you this because I’m an NRI – non resident Indian myself. I’m telling you this because, at the moment, India has the biggest investor base in the world after the United States and Japan. Investors who wish to invest in the Indian stock market can invest in shares, debentures, stocks, securities, mutual funds and also other holdings.
Share trading is done primarily in the National Stock Exchange and the Bombay Stock Exchange. You don’t have to be physically present to do this. You can choose to trade online or via telephone through a broker who is present at the Stock exchange, or who has an agent at the exchange.
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Where To invest in India?
NRIs wishing to invest in the Indian Stock exchange can do so using the Portfolio Investment Scheme. This is basically regulated by the Reserve Bank of India. However, NRIs are not allowed to perform day trading which basically means buying and selling of stocks on the same day. In addition to the National and Bombay Stock Exchanges, there are twenty one stock exchanges in the country, so you could choose to trade through any of them. But the most active ones by far are the National and Bombay Stock Exchanges.
So it follows that you would benefit greatly if you traded through either of these two stock exchanges. The NSE is even equipped with a model stock exchange and has a fully automated system which you may take advantage of. And BSE is one of the oldest stock exchanges in the world. In fact it has the largest number of listed companies in the country – even larger than the number of companies listed on the National Stock Exchange. Regulation of these Stock markets is the responsibility of the SEBI or the Securities Exchange Bureau of India which has its headquarters in Mumbai.
Another way to invest in the stock market, without having to do too much research on your own is by investing in Mutual Funds. And why not? Since the Indian economy is booming! The Indian stock market is highly regulated as a result of which most non Indians cannot invest in it. However Non Resident Indians are in a special situation and they can invest in the stock market.
NRI Banking Matters
So what do you do in order to invest in the Stock Market? You open a Bank Account. This is basically used to invest all the funds that you need to. You need to do this because if you are based out of India your funds will basically be in a currency other than the Indian Rupee. So should you be holding your funds in rupees or in a foreign currency?
When you think in terms of technical terms, you have to decide whether you want your account to be repatriable or no repatriable. If it is repatriable, the balance which is in your account in India can be taken out of the country and in the case of non repatriable it cannot be taken out of India. So the choice is yours.
The account can be held in the local currency and NRIs who have a source of income in the country or even expenditure in the country could choose to have what is known as an NRO account. You can have the standard three types of accounts – savings, current or deposit. Your local income such as rent you receive or dividends etc. can be put into this account. In addition to this, you need to have a DEMAT and brokerage account to invest in the Indian stock markets. Good luck!
By: Karey Girish