Indian Stock Markets
India is not only the 5th largest economy in the world, but from September 2022 it is also the 5th biggest equity market. The outlook of the Indian economy and the market is stable and appealing to invest in.
Indians are spread across the world and they always wish to invest in Indian stock markets. The Foreign Exchange Management Act (FEMA) allows non-resident Indians to invest in Indian markets.
Let us explore how to invest in the Indian stock market from Canada.
Important Terms to know
Before knowing how to invest, to start investing, let us learn a few terms:
**NRI **is an Indian citizen who stays in foreign countries for 183 days or more in a particular financial year or a citizen who has stayed less than 365 days in India in the past 4 consecutive financial years and less than 60 days in the existing financial year.
A Non-resident External Account (NRE) is a savings bank account and is used to transfer money earned abroad to India. A Non-resident ordinary Account (NRO) is used to maintain and manage the money earned by a NRI within India.
A **Repatriable Demat **account is linked to a NRE account and allows you to transfer funds from India to abroad or vice versa. A **non-repatriable account **is linked to an NRO account and allows you to trade in Indian markets but doesn’t allow you to transfer the funds.
The Canadian Non-Resident Indian can invest through a Portfolio Investment Scheme (PIS) or a Non-PIS account. A PIS account is specially used to invest in the share market and is supervised by the RBI, whereas a Non-PIS account is used to invest anywhere in India including its share market.
How to invest in the Indian stock market from Canada?
The Canadian NRI must firstly open a NRE or NRO account based on your needs, then open a repatriable or a non-repatriable account demat account and link it to their NRO or NRE account. Later, they can invest in Indian stock markets though a PIS or non-PIS account. A PIS supports both an NRE and NRO account, but a non-PIS account supports only a NRO account.
Example:
Jai is a Canadian NRI who would like to invest only in the Indian share market and would like to transfer the funds to Canada and vice versa. For this purpose, he has to open a NRE account, link it to a repatriable demat account and start trading with a PIS account.
A Canadian resident can also invest in Indian market through the Qualified Foreign investor (QFI) route, where he/she needs to open a depository account, demat, trading account, and a single non-bearing rupee account. Once done, he/she must apply and get a PAN card and undergo KYC and AML identity check. After successfully following the above steps he/she can start investing in the Indian stock market.
As an expert in international investing and financial markets, I bring a wealth of knowledge to guide you through the intricacies of investing in the Indian stock market from Canada. My expertise is grounded in a deep understanding of the relevant regulations, financial instruments, and the dynamics of the global economy.
Now, let's delve into the key concepts mentioned in the article:
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NRI (Non-Resident Indian):
- Definition: An Indian citizen who resides in foreign countries for 183 days or more in a specific financial year or has stayed less than 365 days in India in the past four consecutive financial years and less than 60 days in the existing financial year.
- Significance: NRIs play a crucial role in the Indian economy and stock market, with specific regulations governing their investment activities.
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NRE (Non-Resident External) and NRO (Non-Resident Ordinary) Accounts:
- NRE Account: A savings bank account used to transfer money earned abroad to India.
- NRO Account: Used to maintain and manage the money earned by an NRI within India.
- Significance: These accounts facilitate the seamless movement of funds for NRIs and serve different purposes in managing their finances.
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Repatriable Demat Account vs. Non-Repatriable Account:
- Repatriable Demat Account: Linked to an NRE account, allowing the transfer of funds between India and abroad.
- Non-Repatriable Account: Linked to an NRO account, enabling trading in Indian markets but not allowing fund transfers abroad.
- Significance: These accounts determine the movement of funds and the extent of international transactions NRIs can engage in.
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Portfolio Investment Scheme (PIS) and Non-PIS Account:
- PIS Account: Supervised by the RBI, specifically used for investing in the share market.
- Non-PIS Account: Allows investment anywhere in India, including the share market.
- Significance: The choice between PIS and Non-PIS accounts depends on the investment preferences and needs of the Canadian NRI.
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Qualified Foreign Investor (QFI) Route:
- Process: Involves opening a depository account, demat account, trading account, and a single non-bearing rupee account. Requires obtaining a PAN card and undergoing KYC and AML identity checks.
- Significance: Provides an alternative route for Canadian residents to invest in the Indian market, subject to specific procedures and regulatory compliance.
By following the outlined steps and understanding these terms, a Canadian NRI like Jai can navigate the process of investing in the Indian stock market seamlessly. Whether through the PIS or Non-PIS route, or the QFI route for Canadian residents, these concepts form the foundation for informed and strategic investment decisions in the dynamic Indian financial landscape.
