This article explains in detail about how an NRI can trade in Indian stock market. I am getting lot of mail on NRI investment doubts from our readers. I felt it would be good to write down separate article on the topic. If I have not covered any of the topic, please post it in the comments section. I will be interested in answering all your queries. If you like the article, subscribe to our future articles here.
Can NRI invest in India?
This is the basic doubt with most of the NRIs who want to invest in the Indian stock exchanges. There are no problem in investing in the Indian equity market. They can directly invest in the Indian companies equity market using their own demat account or broker account. But, they can not do the intra day trades. Intra day trade means you can buy the share today and sell it on the same day. Here you will not hold any security to your demat account. This is not allowed for the NRI investors. They can sell only what they have in the demat account. I hope this one understandable. In the next sections we will see what are requirements for NRI investors to participate in the Indian market.
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How an NRI can start investment in India?
The following are the steps for NRI investors.
- Open a bank account.
- He should open a Demat Account with a Depository Participant to hold his shares.
- Register with broker to trade in the stock exchanges. (ie, ICICI Direct, ShareKhan, etc.)
- Above two can be done with same broker.
- Reserve Bank has authorized a few branches of few banks to conduct the business under Portfolio Investment Scheme on behalf of NRIs. These branches are the main branches of major commercial banks. NRIs will have to route their applications through any of the designated bank branches that have authorization from Reserve Bank.
- NRIs are permitted to make direct investments in shares/ debentures of Indian companies/ units of mutual fund.
- An NRImust open separate demat accounts for holding ‘repatriable’ and ‘non–repatriable’ securities.
- repatriable means transferring your security from India to another country. That is not allowed for the NRIs. If you bought any shares while in India, When you become NRI you can not sell that from your NRI demat account and use it outside India.
- If an NRI become resident Indian, he has to inform the bank about his new status and open new demat account in India to transfer all securities to Indian account.
Important Points for NRI Investors
- NRI can deal with only one bank at a time.
- Intra day trading is not allowed for NRIs. NRIs can trade only in delivery-based transactions.
- BTST(Buy Today Sell Tomorrow) is not allowed to NRIs.
- NRI will be allowed to invest only up to 5 % of the paid up capital of the company.
- NRIs need to have 100% funds at the time of buying. No exposure is given to NRIs. Same way, they need to have 100% stock available to them while selling. No short selling allowed.
I hope this article would be more useful for the NRI investors. If you have any doubts which I have not covered in this article, please post it in the comments section.
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