NSE IFSC Limited, widely known as the NSE International Exchange, is a wholly-owned subsidiary of the National Stock Exchange (NSE) of India. Established on 29 November 2016, it was launched after receiving authorization from the Securities and Exchange Board of India (SEBI) to create an international exchange within Gujarat International Finance Tec-City (GIFT City) in Gandhinagar.
The primary goal of NSE IFSC is to expand financial markets and attract foreign capital into India. Under the GIFT IFSC framework, exchanges can conduct transactions in foreign currencies beyond the Indian Rupee, facilitating international investment in Indian securities.
Substantially, all trading and settlement activities on the NSE IFSC platform are conducted in US dollars, minimizing currency fluctuations. This creates a stable, predictable environment that benefits international investors trading in Indian stocks.
NSE IFSC: GIFT CityÂ
GIFT City, located in Gujarat, is a special economic zone that hosts the NSE IFSC. In this financial hub, stock exchanges can trade securities in currencies other than the Indian Rupee. It facilitates trading in various financial instruments, including foreign equity shares, depository receipts, and derivatives, subject to SEBI approval.
Direct listings of stocks at GIFT City have started, enhancing access to global capital for Indian companies. In addition to these developments, the government is positioning GIFT City as a hub for carbon credit trading, aiming to integrate sustainability into its financial framework.
Additionally, the finance ministry has lowered the mandatory public offering requirement from 25% to 10%, making it easier for companies to list internationally and attract foreign investment. The International Financial Services Centres Authority (IFSCA) regulates GIFT City, which is expanding rapidly with multiple exchanges and numerous financial entities.
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Are Indian Retail Investors Allowed to Trade in GIFT City?
Indian retail investors are permitted to invest and trade in financial instruments at GIFT City, provided they comply with specific regulations outlined by the Foreign Exchange Management Act (FEMA). To qualify for these investments, individuals must be residents of India. Under the Liberalized Remittance Scheme (LRS), they can transfer up to USD 250,000 per financial year for various investment activities, including acquiring stocks and establishing joint ventures. However, it is important to note that funds transferred through the LRS cannot be utilized for trading margined products or derivatives.
To engage in trading at GIFT City, investors are required to open a Demat account with a broker registered with the NSE International Exchange. The city offers a diverse range of financial instruments, including shares, bonds, mutual funds, and government securities, all of which are traded in foreign currencies.
In addition, recent regulatory changes by the Securities and Exchange Board of India (SEBI) have made investments more appealing. These changes include relaxing caps on fund exposure to group company stocks and lowering the minimum ticket size for bond investments. These developments, combined with tax benefits for certain investment activities, significantly enhance GIFT City’s attractiveness as a global financial hub. They provide Indian retail investors with greater access to a variety of investment opportunities.
Accessing US Stock Markets: Opportunities for Indian Investors
Investors can leverage a variety of investment opportunities at the NSE International Financial Services Centre (NSE IFSC), including trading in equity, currency, and commodity derivatives. However, the primary attraction of the NSE IFSC is its provision for investors to trade in U.S. stocks. The exchange allows investment in 50 prominent U.S. companies such as Amazon, Apple, Microsoft, Alphabet (Google), Netflix, Meta (Facebook), Walmart, and Tesla. Notably, these stocks are not listed in India; instead, they are available through unsponsored depository receipts.
Unsponsored depository receipts are operated by market makers acquiring shares in the United States and issuing receipts based on these holdings. Since these are unsponsored receipts, there is no involvement or consent from the companies whose stocks are being traded. Known as NSE IFSC receipts, these instruments enable investors to engage in trading activities through registered brokers at NSE IFSC. Essentially, these receipts confer a proportionate beneficial interest in the underlying shares of the respective U.S. companies.
This structure not only simplifies access to U.S. stocks but also allows for fractional ownership, making investments more affordable for retail investors. Furthermore, all trades conducted through NSE IFSC will be governed by a robust regulatory framework ensuring transaction security and investor protection.
NSE International Exchange: How to Trade in US Stocks?Â
Trading US stocks on the NSE International Financial Services Centre (NSE IFSC) is designed to be straightforward. For example, if an investor wants to buy one share of Apple Inc., currently priced at approximately USD 229.15, they would need around INR 18,700. However, through NSE IFSC, this share is represented by 10 IFSC receipts, allowing investors to purchase a fraction of a share for a significantly lower amount. This fractional ownership model makes high-value stocks like Apple more accessible and affordable for retail investors.
By utilizing these receipts, investors can trade through registered brokers at NSE IFSC without needing the full amount required for a complete share. This innovative approach not only broadens investment opportunities but also allows Indian retail investors to participate in the global stock market while adhering to the Liberalized Remittance Scheme (LRS).
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- Depository Receipts (DRs) are a mechanism used by companies listed in one country to attract investors and facilitate trading in another country’s exchanges. DRs can be sponsored or unsponsored depending on the involvement of the company.
- In the context of NSE IFSC, the DRs that trade on its global platform are unsponsored. This means that the depository receipts are not directly issued by the companies themselves. Instead, NSE IFSC collaborates with an international custodian (HDFC Bank IBU, in this case) to act on its behalf. The custodian holds the shares of the listed companies in the United States and then issues DRs to the depository account in India.
- Subsequently, these unsponsored DRs are listed on the NSE global platform, enabling investors to trade them. To ensure smooth and active trading, NSE IFSC has partnered with significant market makers. These market makers provide two-way quotes on the exchange, allowing for trading with low-impact costs. Market makers would need to park the shares with the international custodian before providing sell quotes.Â
NSE IFSC Registered Brokers
Before delving into the specifics of trading US stocks on the NSE International Financial Services Centre (NSE IFSC), it is essential to understand the pivotal role of registered brokers within this framework. Currently, Fifty brokers are registered with NSE IFSC, providing investors access to global markets. Anand Rathi, Emkay, HDFC, Motilal Oswal, and SMC Global are popular brokers for NSE IFSC. However, notable platforms like Zerodha and Upstox have not yet secured registration with the international exchange.
NAME | CATEGORY |
ANAND RATHI INTERNATIONAL VENTURES (IFSC) PRIVATE LIMITED | TM |
APPRECIATE BROKING IFSC PRIVATE LIMITED | TM |
ARYA FIN-TRADE IFSC PRIVATE LIMITED | TM-SCM |
ASHIKA STOCK BROKING IFSC PRIVATE LIMITED | TM |
BONANZA PORTFOLIO (IFSC) PRIVATE LIMITED | TM |
DAGA BUSINESS (INTERNATIONAL) STOCK BROKERS (IFSC) | TM |
DIVYA PORTFOLIO (IFSC) PRIVATE LIMITED | TM |
DOLAT CAPITAL IFSC PRIVATE LIMITED | TM |
EAST INDIA IFSC PRIVATE LIMITED | TM-CM |
EMKAYGLOBAL FINANCIAL SERVICES IFSC PRIVATE LIMITED | TM |
ESTEE IFSC PRIVATE LIMITED | TM |
EVERMORE GLOBAL (IFSC) PRIVATE LIMITED | TM |
EXCEL BROKING (IFSC) PRIVATE LIMITED | TM |
FINDOC INVESTMART (IFSC) PRIVATE LIMITED | TM |
GEOJIT IFSC LIMITED | TM |
GLOBE CAPITAL (IFSC) LIMITED | TM-CM |
GOLDMINE IFSC PRIVATE LIMITED | TM |
GRD SECURITIES IFSC LIMITED | TM |
GROWTH GLOBAL SECURITIES (IFSC) PRIVATE LIMITED | TM |
HDFC BANK LIMITED- IFSC BANKING UNIT (IBU) | TM-CM |
ICICI BANK LIMITED (IBU) | TM-CM |
INDMONEY GLOBAL (IFSC) PRIVATE LIMITED | TM-SCM |
INDO THAI GLOBE FIN (IFSC) LIMITED | TM |
IVIK SECURITIES IFSC PRIVATE LIMITED | TM |
JAINAM IFSC MAVENS PRIVATE LIMITED | TM |
JUNOMONETA INTERNATIONAL IFSC PRIVATE LIMITED | TM-CM |
KOTAK MAHINDRA BANK (IBU) | PCM |
MANSUKH IFSC BROKING PRIVATE LIMITED | TM-SCM |
MARWADI INTERNATIONAL SECURITIES (IFSC) LIMITED | TM |
MOTILAL OSWAL FINSEC IFSC LIMITED | TM |
NUVAMA CAPITAL SERVICES (IFSC) LIMITED | TM-CM |
OPEN FUTURES AND COMMODITIES IFSC PRIVATE LIMITED | TM |
PACE FINANCIAL (IFSC) PRIVATE LIMITED | TM-SCM |
PHILLIP VENTURES IFSC PRIVATE LIMITED | TM-CM |
PLUSTRADE HOLDING (IFSC) PRIVATE LIMITED | TM |
QUADEYE IFSC PRIVATE LIMITED | TM |
RAGHUNANDAN CAPITAL (IFSC) PRIVATE LIMITED | TM |
RARU CAPITAL IFSC PRIVATE LIMITED | TM |
RSL IFSC PRIVATE LIMITED | TM |
SGX INDIA CONNECT IFSC PRIVATE LIMITED | TM-SCM |
SHARE INDIA SECURITIES (IFSC) PRIVATE LIMITED | TM |
SIHL GLOBAL INVESTMENTS (IFSC) PRIVATE LIMITED | TM |
SILVER STREAM EQUITIES (IFSC) PRIVATE LIMITED | TM |
SMC GLOBAL IFSC PRIVATE LIMITED | TM-CM |
STAR FINVEST (IFSC) PRIVATE LIMITED | TM |
STOCKHOLDING CORPORATION OF INDIA LIMITED (BRANCH) | PCM |
STOCKHOLDING SECURITIES IFSC LIMITED | TM-CM |
SUNRISE GILTS (IFSC) PRIVATE LIMITED | TM |
SYNERGY DEALCOM (IFSC) PRIVATE LIMITED | TM |
TRADEAIR (IFSC) PRIVATE LIMITED | TM-SCM |
Key Points About NSE’s Global Exchange
- IFSC Receipts: IFSC receipts do not represent a single share of a US stock. Instead, they are issued in specific ratios or proportions of the underlying asset or stock that investors intend to buy. For instance, 50 NSE IFSC receipts may constitute one single US stock, or 100 IFSC receipts may represent half ownership of a given US stock.
- Market Timings: The market timings at NSE IFSC differ from the Indian market. Trading on the NSE IFSC begins at 8:00 PM and closes at 2:30 AM, providing investors with the opportunity to participate in the global markets during these hours.
- Price Movement: The minimum price movement for the underlying securities traded on NSE IFSC is USD 0.01. This means that the price can fluctuate from USD 1.64 to USD 1.65, USD 1.66, and so on.
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NSE IFSC: Membership Categories
NSE provides four types of membership at its international exchange. Members are chosen through a rigorous and transparent process to ensure the smooth and secure operation of the exchange systems.Â
Trading Member | This category of membership entitles a member to execute trades on his account as well as on account of his clients but, clearing and settlement of trades executed through the Trading Member would have to be done through a Trading-cum Clearing Member or Professional Clearing Member of the NSE IFSC Exchange. |
Trading Cum Self Clearing Member | This category of membership entitles a member to execute trades and to clear and settle the trades executed on his account as well as on the account of his clients. |
Trading Cum Clearing Member | This category of membership entitles a member to clear and settle trades of such members of the NSE IFSC Exchange who choose to clear and settle their trades through this member. |
Professional Clearing Member | This category of membership entitles a member to clear and settle trades of such members of NSE IFSC Exchange who choose to clear and settle their trades through this member. |
Membership Process of NSE International Exchange
- Incorporate a company in GIFT SEZÂ
- Apply GIFT SEZ-IFSC & obtain approval from the Development CommissionerÂ
- Submission of application to NSE IFSC / NSE IFSC CCÂ
- Grant of NSE IFSC Exchange/CC offer letter subject to SEBI ApprovalÂ
- Onward submission by NSE IFSC to SEBI for registrationÂ
- Grant of SEBI ApprovalÂ
- Forward the SEBI certificate to the memberÂ
- Submit enablement documentsÂ
- Member enabled on the Trading systemÂ
This was all about investing in US stocks from India through NSE’s global platform.
Conclusion
The NSE International Financial Services Centre (NSE IFSC) provides a distinctive opportunity for Indian investors to engage in trading US stocks with fractional ownership, enhancing accessibility and affordability. Situated in GIFT City, a special economic zone regulated by the International Financial Services Centres Authority (IFSCA), NSE IFSC creates a favourable environment for international financial activities. This platform allows retail investors to diversify their portfolios and gain exposure to global markets.
For those seeking investment avenues beyond the domestic landscape, NSE IFSC represents an appealing option to participate in the growth of leading US companies while mitigating the effects of currency fluctuations. With the ability to invest in well-known US stocks through unsponsored depository receipts, investors can benefit from this innovative structure without the need for substantial capital outlay typically associated with direct stock purchases.
Can Indian retail investors trade in US stocks at NSE IFSC?
Yes, resident Indians can invest and trade in US stocks at NSE IFSC. However, they must comply with FEMA regulations and can invest up to USD 250,000 per year via LRS.
What is the significance of NSE IFSC receipts?
NSE IFSC receipts represent unsponsored depository receipts that allow investors to trade US stocks with fractional ownership, making it more affordable.
Which brokers are registered with NSE IFSC?
Some well-known brokers registered with NSE IFSC include Anand Rathi, Emkay, HDFC, Ind Money, Motilal Oswal, and SMC Global.
What is the role of market makers in NSE IFSC?
Market makers provide liquidity and two-way quotes for trading US stocks on NSE IFSC’s platform, ensuring efficient transactions with low impact costs.