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The easy way to go global

For Indian investors with global investment appetite, there are options now. If you are inclined towards mutual funds, then there are those, but if you are someone who wants to make direct investments, then there are emerging options for that as well.

For Indian investors with global investment appetite, there are options now. If you are inclined towards mutual funds, then there are those, but if you are someone who wants to make direct investments, then there are emerging options for that as well. Last month, the Reserve Bank of India increased the remittance limit for individual investors to $200,000 (Rs 80 lakh) per financial year from $100,000 (Rs 40 lakh).

Taking cues from this, ICICI direct, the online trading arm of ICICI Bank, started offering an overseas trading platform to investors last fortnight.

The easy way
 

For this purpose, the firm tied up with a Dallas-based American securities services provider, Penson Financial Services, Inc. Penson is a securities services firm that provides flexible, technology-based processing solutions for the execution, clearing, custody and settlement of securities transactions.

As a result of this tie-up, customers will get single-window access to both domestic and US share trading. This will allow them to invest in overseas securities such as shares, American Depositary Receipts, index options and exchange-traded funds on the New York Stock Exchange, American Exchange and NASDAQ.

Investors trading through the website can now buy shares of Microsoft or Google or other instruments in the US markets sitting at their desktops.“Our belief is that this product will grow in the coming years,” says Anil Kaul, Head, ICICI direct.

The service will be available in a manner similar to domestic transactions, Kaul says. A onetime overseas account opening fee of Rs 999 will be charged, and broking fee for each transaction will be 0.75 per cent of the trade or $9 (Rs 360), whichever is higher.

The remittance has to happen before the transactions are processed. Investors, however, have to do only delivery-based trades—margin trading is not allowed. The shares will be held by the broker (technically street name), which in this case is Penson, and the client is the beneficiary.

Though the service is presently available only for buying in the US market, ICICI direct expects to add other markets too, albeit over time. “In the securities market, we need a framework that is compliant with the regulations in both countries. That takes time,” adds Kaul.

BASIC GUIDE TO GOING GLOBAL 

  • Overseas account opening charges: Rs 999
  • Broking fee for each transaction: 0.75 per cent or $9 (Rs 360) whichever is higher
  • The shares will be held by Penson
  • Only delivery based trades are allowed—no margin trading
  • At present, the service is presently only for US markets 

However, there is a caveat. Equity investments anywhere have their risks and investors must do their homework before investing. Investors also have to contend with the currency risk.

For now, the dollar has been depreciating against the Indian rupee, and if this trend continues, investors can log some rupee losses. For starters, investors will have to buy dollars and then use the same to buy US stocks.

Later, when investors want to check out of their US positions, they will have to reconvert the dollars back to rupees.

Assuming that the Indian rupee has appreciated, investors will get a lower amount of rupees—depending on the quantum of rupee appreciation.

Investors also have to scout around for fundamentally sound companies that have a growth potential and those that can beat both the appreciating rupee as well as counter the slowdown in the US, which seems to be a little tough in these markets. It’s certainly not a game for the greenhorns.