Investing in international stocks is an excellent measure to reduce the risk associated with your portfolio and diversify it. The US market makes up almost half of the global capitalization at 43.2%. The Indian market, in comparison, ranked sixth globally, representing 2.97% of the world’s market capitalization.
In case you are wondering whether you can buy US stocks from India. There is good news. You can indeed buy US stocks from India. In this article, we will discuss how you can trade US stocks from India and the relevant economic indicators you should observe.
In addition to this enormous market capitalization, the US stock market also lists various stocks from across the globe. This attracts numerous global investors to the US stock market, providing market liquidity unrivaled by any nation. All these present tremendous opportunities to Indian traders and investors alike.
How to trade US stocks from India?
We will discuss how to invest or trade in the US stock market below. And, yes, this includes intraday trading in the US market from India.
There are multiple avenues available to trade in the US stock market:
- Overseas trading account: Open this account either through a domestic or international broker. Domestic brokers provide such services by collaborating with an international brokerage firm. However, the options provided tend to be limited. If you go through an international broker, understand the fees levied as they include some charges that are not charged on domestic trading, like forex charges.
- NSE IFSC or India INX: The NSE provides an opportunity to trade US stocks through its subsidiary NSE IFSC. The NSE IFSC offers investment opportunities in the top 8 US companies. India INX, a product of the BSE, provides investment opportunities in international markets, including the US. It has collaborated with Interactive Brokers, a US-based broker. As a result, Indian investors can invest in the entire US stock market.
- Mutual Funds: These are the indirect investment methods available to Indian investors. Various fund houses offer US-focused mutual funds. This investment medium is suited for individuals that lack the knowledge of trading and investing.
All these investment routes require the completion of the KYC process. Additionally, you must complete the necessary LRS documentation.
Economic Indicators to Be Observed
Just as you closely observe Indian economic indicators like the MPC decision, CPI, PMI, etc., to ascertain the overall market sentiment. You must do the same thing in the US market. This will help you invest wisely and achieve profitable intraday trading in the US market from India. Some major indicators of the US market are:
- Federal Funds Rate: The US central bank, Federal Reserve, is responsible for setting the base interest rate in the US. As banks and various lenders use this rate to determine their interest rates, it is of great significance. This rate is a crucial factor influencing the US economy’s growth.
- Inflation is a critical factor in the Federal Reserve’s interest rate decision. The Federal Reserve closely observes the inflation rate to maintain price stability. The Fed typically raises the fund’s rate if inflation is high.
- Unemployment Data captures the number of unemployed workers in the labour market. Since unemployment impacts the households’ income, this illustrates an economy’s climate.
With numerous brokers offering US investment opportunities, intraday trading in the US market from India is possible. The opportunity to trade US stocks from India provides Indian investors with innumerable opportunities. That said, there are also several risks that investors should be concerned about. Exchange rate risk poses a significant risk to Indian investors. You can use hedging tools to minimize this risk. Another risk worth mentioning is the tax implication. India and the US have signed the Double Tax Avoidance Agreement (DTAA) to avoid repeated taxation on the same income. Apply for DTAA to benefit from this tax treaty.