Indians have been investing in our domestic stock market for several decades. The BSE Sensex was launched in 1979 and NSE Nifty in 1993. Mutual Fund Sector was privatised in 1992 after India’s liberalisation initiative and since 2010 Alternative Investments such as Venture Capital, Private Equity, Angel Investing, started gaining momentum. There is one area however where Indian Investors have lagged, which is International Investments.
With most of the largest Companies in the World based in USA, Europe, China and Japan, Indian investors have not taken much interest in global investments. This is mainly because of the lack of knowledge about global investment opportunities as well as limitations set by the RBI for international Investments.
India is the best-performing Equity market at this time. However international opportunities in USA, China, South Korea should not be ignored. Companies listed in these countries have offered returns at par with Indian Stock markets. The depreciation in the value of the Indian Rupee against the US Dollar offers further scope for increased profits.
International Asset Managers such as The BlackRock Group and the Vanguard Group offer a wide range of ETFs and Index Funds for global investors. Index Funds can be directly purchased through Vanguard or other Asset Management Companies. ETFs are registered on certain Stock Exchanges like NYSE ARCA, NASDAQ, Euronext, Hong Kong Stock Exchange, London Stock Exchange etc., and can be purchased through International Stock Brokers. Some of the popular International Stock Brokers are, Interactive Brokers, Charles Schwab Internatinal, TD Amierate, E-Trade, among others. In order to buy an ETF registered on an international stock exchange, Indian investors have to transact through one of these Stock Brokers.
Professional advice can be used to choose ETFs and Index Funds. The transactions are to be executed by Self on the Brokers website by downloading a workstation. International Brokerage rates apply. The ETFs and Index Fund house also charges a Fund Management Fee which is usually a small fraction of the invested amount. Funds can be redeemed on a T+2+4 basis to provide for international remittance. The Units are held in the pool account of the Broker in the Client’s name until redeemed.
Investing through ETFs and Index Funds helps with diversification and lower costs. Investors can invest in all major Countries in the World. The limit set by RBI for international investments by Indian Citizens residing in India is $250,000/- per annum, equivalent to INR 1.75 Crore. Capital Gains are subject to Indian Tax laws and such investments are taxed similar to Debt Investments in India.
