How to Invest in US and Indian Stocks from the USA

Investing in the global stock markets offers investors the opportunity to diversify their portfolios and potentially achieve higher returns. For investors based in the USA with an interest in either US or Indian stocks, there are several channels through which to conduct these investments. This guide will outline the steps and requirements for investing in US and Indian stocks from the USA, providing a comprehensive overview.

For Indian nationals with a direct link to the country, the process is relatively straightforward through the Liberalised Remittance Scheme (LRS) offered by the Reserve Bank of India (RBI). This scheme allows for a yearly remittance of up to $250,000 (approximately INR 17,000,000) to be used for foreign portfolio investments, including US stocks, categorized under the purpose code 'Indian Investment Abroad - in Equity Capital Shares'. However, for foreign citizens, the process can be more complicated and may involve additional paperwork and regulatory compliance.

Investing in US Stocks from India

The process of investing in US stocks primarily involves the following steps:

Opening a Foreign Trading Account: Start by opening a foreign trading account with an international brokerage firm. This can be done through an app, an Indian broker who has international ties, or directly with a foreign broker. Compliance with KYC and Regulatory Rules: Complete the necessary Know Your Customer (KYC) and Know Your Trading (KYT) procedures. Brokers can guide you through this process as per RBI's LRS rules. Execution of Shares: Once the account is set up and KYC is completed, you can start trading in US stocks.

Investing through apps has seen widespread popularity among retail investors. HDFC Securities is one of the leading platforms in India that helps you invest in foreign markets, including US stocks. They offer easy and user-friendly options for international trading.

Three Ways to Invest in US Stocks from India

Invest through Apps: App-based investment, such as through HDFC Securities, has become increasingly popular. These platforms make it simple and accessible to investors to participate in the global markets. Through an Indian Broker with International Tie-Ups: Many large broker firms in India have partnered with international brokers, offering services to Indian investors looking to invest in foreign equities. Utilizing these tie-ups can simplify the process of investment. With a Foreign Broker: Foreign brokers with local offices in India are an option for direct investment. Opening an account with such a broker enables you to trade in foreign equities, including those listed on NASDAQ and NYSE.

Based on my research and practical experience, HDFC Securities is considered one of the safest and most reliable platforms for Indian investors to invest in US stocks from the USA. They categorize US stocks into various tech, pharmaceutical, and other sectors, making it easier for investors to choose based on their preferences and market cap.

Investing in Indian Stocks from the USA

For investors looking to diversify their portfolios and take advantage of the emerging Indian market, investing in the Indian stock market from the USA is a viable option. Here are the methods available:

Global Depository Receipts (GDRs) and American Depositary Receipts (ADRs): These are tradable securities that represent a claim on underlying shares of Indian companies. These can be purchased through commission-free brokers like Webull or Robinhood, enabling access to US exchanges like the New York Stock Exchange (NYSE) and NASDAQ, or the London Stock Exchange (LSE) for GDRs. Investing in Indian Stock ETFs: ETFS are a convenient way to invest in a basket of Indian companies. They blend the benefits of mutual funds with the flexibility of stock trading. Using an Indian Stockbroker: Investors can open an account with a SEBI-regulated Indian stockbroker. Depending on the amount invested, it may be necessary to register as a Foreign Institutional Investor (FII).

The potential for profit from investing in the Indian stock market, which has a low correlation (0.29) with the US market, offers investors the opportunity to hedge against currency risks. This can be particularly beneficial for those looking to benefit from the growth potential of the Indian market.