How to Invest in Indian Stock Markets for NRIs in London?

Reading Time: 4 minutes

Investing in the Indian stock market is an appealing option for NRIs (Non-Resident Indians) living in London. With India’s growing economy and promising financial markets, NRIs can benefit from strong returns and portfolio diversification. However, navigating the process as an NRI can be a bit different. In this blog, we’ll discuss how NRIs in London can invest in the Indian stock market, the key steps involved, and essential factors to consider.

Why NRIs Need to Invest in the Indian Stock Market

1. India’s Rising Economy The economy of India has grown very rapidly in recent years due to sectors like technology, pharma, and consumer goods. The growth of the stock market is also the same, with shares like Nifty and Sensex returning good profits to investors. NRIs need to take advantage of India’s economic growth through investment in blue-chip shares and fast-growing sectors.
2. Portfolio Diversification Investing in the Indian share market allows NRIs to diversify their portfolio. Investing in Indian shares allows you to diversify your foreign investments and reduce the risk of investing in the market of a single country, especially when the world economy is volatile.

How NRIs Can Invest in the Indian Share Market

1. Open an NRI Account NRIs need special accounts to invest in India. You can open either:

• NRE (Non-Resident External) Account: Repatriable, i.e., you can remit money back to London.
• NRO (Non-Resident Ordinary) Account: Non-repatriable, for managing income in India.

1. Open a PIS (Portfolio Investment Scheme) Account In order to invest in the stock market, NRIs are required to register themselves under the Portfolio Investment Scheme (PIS) with a chosen bank. Under this scheme, NRIs can directly invest in Indian shares and comply with the RBI regulations.
2. Open Demat and Trading Account Once you have your NRE/NRO and PIS accounts open, you are required to open a Demat account and a Trading account in a registered Indian stockbroker. The Demat account will contain your shares electronically, and the Trading account will enable you to buy and sell shares on Indian exchanges of NSE and BSE.
3. Be Tax Compliant and Regulated NRIs must remember the tax consequences while investing in India. Capital gains on equity investments are subject to taxation. Short-term capital gains (if sold within one year) are taxed at 15%, and long-term capital gains (if held for more than one year) above ₹1 lakh are taxed at 10%.

Key Things to Consider for NRIs

1. Currency Exchange Risks Being an NRI residing in London, your Indian stock investments will incur currency fluctuations between the British Pound (GBP) and the Indian Rupee (INR). Exchange rate changes can affect the yields on your investment, so it’s best to keep track of exchange trends from time to time.
2. Keep Yourself Updated About Indian Market Trends It’s important that you are very informed about India’s economic growth, market trends, and sector performances. Staying updated with financial news, analysis, and tracking stock indices like Nifty 50 and Sensex will help you make prudent investment decisions.

Conclusion

Investment in the Indian stock market for NRIs in London is the opportunity to harvest one of the world’s fastest-growing economies. By following the proper steps—opening necessary accounts, fulfilling the regulations, and maintaining abreast of information—you can establish a profitable investment portfolio. Although risks on currency and taxation need to be undertaken with care, the potential for good returns makes the Indian stock market a well-deserving part of the financial plan of an NRI.

FAQs

1. Can NRIs invest in Indian stock markets?
   Ans – Yes, NRIs can invest in Indian stock markets by opening NRE/NRO and PIS accounts.
2. What is a PIS account?
   Ans – A Portfolio Investment Scheme (PIS) account allows NRIs to invest in Indian stocks under RBI regulations.
3. Do NRIs need a Demat account to invest in Indian stocks?
   Ans – Yes, a Demat account is necessary to hold shares in electronic form.
4. What are the tax implications for NRIs on Indian stock investments?
   Ans – NRIs are charged 15% on short-term capital gains and 10% on long-term capital gains above ₹1 lakh.
5. Are NRIs able to repatriate money from their investments in the stock market?
   Ans – Yes, investments through an NRE account are fully repatriable.
6. What are the currency risks associated with investing from London as an NRI?
   Ans – Currency fluctuations between GBP and INR can affect your returns, especially with big exchange rate fluctuations.
7. Is there a restriction on the number of shares that can be bought by NRIs in India?
   Ans – Yes, NRIs are allowed to buy only 5% of the paid-up capital of the Indian company according to PIS guidelines.
8. Can NRIs buy mutual funds and derivatives?
   Ans – NRIs can buy mutual funds and derivatives, but subject to some restrictions.
9. How do NRIs remit funds to invest in India’s stock market?
   Ans – Remittance from NRE or NRO can be made towards investment in Indian shares.
10. Does RBI regulation need to be obeyed for investment by NRI?
    Ans – Yes, NRIs need to obey RBI regulations and invest in the Indian stock market via PIS accounts.

Disclaimer: The information provided here is for educational and informational purposes only and should not be construed as financial, legal, or tax advice. Consult with a qualified professional before making any investment decisions. We do not accept any liability for errors or omissions in this information nor any direct, indirect, or consequential losses arising from its use.