Can NRIs Invest In Indian Stock Market: Wealth creation is not a new phenomenon. Over time, multiple platforms and segments have been launched which multiplied opportunities for Indian investors.
The Indian stock market has seen growth like never before in recent times and it has attracted a range of investors from across the world. Since India is considered a fast-developing economy, the stock market continues to pull the global crowd.
Stocks in India can mean those representing small and big companies that are publicly listed. Indian stock market saw a significant transformation ever since the trading started with the formation of BSE.
During the initial years, transactions were complicated as individuals used to follow the usual outcry method as online stock trading was not yet introduced.
Ever since the launch of online trading in the Indian stock market, the count of investors has increased significantly. As a result, interest from global investors has increased too.
However, can NRIs invest in Indian stock market? Well, the answer is yes. There is a certain process that needs to be followed if NRIs plan to make investments in the Indian stock market.
Read on to find out how NRIs invest in the Indian stock market, and what can be the rules for that investment.
Indian Stock Market – Growth Story
CY21 was a good year for investors in the Indian stock market. Benchmark NIFTY50 index was able to deliver solid returns to investors in CY21 and made its mark globally.
Foreign institutional investors believe in India’s growth story, and fund managers continue to be optimistic about Indian markets. India’s equity markets saw their best performance among Asian peers.
In nominal terms, the past year was the best year for BSE as Sensex was able to move by ~10,000 points in just one year. BSE Sensex gained 10,054 points between Jan 1, 2021 – Dec 29, 2021.
This means it saw the highest year-on-year growth in absolute terms historically. If you compare Sensex with 10 major world indices across 9 countries, you will get to know that Sensex has shown its best performance among major Asian economies.
Domestic retail investors were behind the growth story of the Indian stock market. Data about the net investment made by domestic and foreign investors and number of Demat accounts exhibit this. Sector-wise, there are 19 indexes in BSE Sensex.
All these indexes exhibited positive growth in CY21 (until December 28). The power and realty subsectors and IT subindex performed significantly well.
CY21 was also a year of IPOs. From Zomato to Paytm, some of the renowned Indian start-ups were listed in the stock market. IPO listings were distributed across sectors.
With such a promising growth story and solid past performance, there is no question as to why NRIs want to be part of Indian equity markets.
Before jumping to the question, can NRIs invest in Indian stock market, it is important to understand who is considered an NRI?
Non-Resident Indian – Who Are They?
To be considered under the NRI category, an individual has to be a Person of Indian Origin (PIO), or he/she needs to be an Indian citizen living abroad. An individual’s stay in India should be over 60 days, but less than 182 days in a particular financial year.
If these conditions are satisfied, even if an individual’s stay in India is 365 days, or more, in the past 4 financial years, an individual will be considered an NRI. An individual can also be regarded as an NRI if he/she has been deputed to a foreign country for over 6 months.
Ways Through Which NRIs Can Invest In The Indian Stock Market
NRIs are allowed to invest in Indian stock markets or equities of Indian Companies. However, the procedure has to be as per RBI norms. Let us now understand how NRIs can invest in the Indian stock market.
As these Indians are NRIs, they need to contact an authorized dealer. However, they can contact a bank also provided that the bank is authorized by the Reserve Bank of India to manage and route the investments. NRIs can make investments through Portfolio Investment Scheme, NRE (Non-Resident External) account, or NRO (Non-Resident Ordinary) account.
NRIs have 3 main ways to manage accounts to make further investments in Indian stock markets. These include appointing a mandate holder, power of attorney, and broker services. Let’s discuss them in detail.
- Appointment of mandate holder: NRIs are allowed to appoint a mandate holder to monitor their NRE or NRO accounts in India. To do this, an NRI needs to furnish an “appointment of mandate holder” application to the bank. Along with this application, the mandate holder should submit the relevant documents and specimen signature of the mandate holder.
- Power of attorney: NRIs can also appoint a power of attorney (POA) in India. He will be responsible for the execution and redemption of any investments made in India. To do this, POA agreement should be made and signed on stamp paper. It should also be notarized before the submission.
- Broker services: With the introduction of internet trading, Indian brokers are allowed to provide online trading facilities to their NRI clients as long as they are in compliance with required KYC guidelines.
Rules Related To NRIs Investing In The Indian Stock Market
Investments in the Indian stock market by NRIs, PIOs, and OCI cardholders are subject to some conditions:
- They are not allowed to do intra-day trading. All the transactions in the cash segment should be settled by delivery.
- They are not allowed to short-sell. Therefore, securities are required to be made available before the execution of any sell order.
- No transactions should be done in securities that are on the RBI ban list.
- Pay-out on the sale will be transferred to the respective NRE or NRO account. This will be done on the basis of whether the purchases were made on a repatriation/non-repatriation basis.
To Sum Up
When someone asks you, can NRIs invest in Indian stock market, you can confidently say, “Yes!” However, the investment should be through the RBI-regulated platform of PIS. Before making investments in Indian stock markets, it is of utmost importance to open an NRI trading account with a trusted and renowned financial partner.
NRIs can explore several investment options in India, and they are required to make use of such investment options to their advantage. This will help them earn returns and build financial assets.
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