Share Market: How to invest in Foreign Countries..!

Decide which market will make up a chunk of your foreign portfolio and keep your account in that currency

Are you beginning to worry that Indian markets are over-heated?

Or that rate hikes by the US Fed will cause market mayhem?

Then maybe you should look to diversify your portfolio overseas by investing a part of your money beyond the borders. The Reserve Bank of India (RBI) allows an individual to remit $ 2,50,000 per financial year (April 1 to March 31) under the Liberalised Remittance Scheme (LRS), which can be used for investing abroad.

New trading account ..

ICICI Securities offers the facility to invest abroad with Saxo Bank, Denmark. If you sign up, a new trading account will be opened with Saxo Bank and held outside India.

The account can be held in any foreign currency — the US dollar, euro, Australian dollar, etc. You need to choose the desired currency at the time that you open an account.

But, that does not prevent you from investing in any market you choose. Conversion is done automatically by the bank, but 0.5% is levied as a conversion charge on each transaction.

Therefore, it makes sense to decide which market will make up the major portion of your foreign portfolio and maintain your account in that currency.

Kotak Securities also offers a similar service, but information gathered from their customer service suggests that it is temporarily unavailable.

Documentation process..!

Saxo Bank requires both identity and residence proof for account opening. Passport, domestic bank account details and a driving licence are accepted.

Those who are not customers of ICICI Securities have the option to open an account directly through Saxo Bank, which has an India website — in.saxobank.com. The entire process is done online. A scanned copy of residence and identity proof can either be sent through an e-mail or uploaded directly at the time of the account opening.

ETFs..!

Morethan 30 markets, including major ones like the US, UK, Germany, Australia, etc, can be accessed through these services.

However, the instruments available for an Indian individual are restricted. Saxo Bank offers investments in foreign stocks, bonds and exchange-traded funds (ETFs).

Since margin trading is not permitted according to the RBI norms, futures and options transactions are not allowed.

Fees & Securities Transaction Tax..!

Transaction charges differ for each market. A fee of $ 0.02 a share, or $ 15 a trade, whichever is higher, is charged for investing in US stocks.

In the case of the UK market, the charges are slightly higher, as 0.5% is levied in the form of Securities Transaction Tax (STT) in addition to the commission rate of 0.10% or £8, whichever is higher.

The complete list of charges and commissions are available to the public on the Saxo Bank India website.

Currency fluctuation is a major risk you will encounter when taking bets overseas. Currency risk is not just limited to the instruments you trade in, but also affects the balances you hold in your account. Therefore, you need to be careful in choosing the default currency for your account.

For instance, the euro is facing turbulent times currently and has tumbled over 20% in the last one year.

Accessing information about other markets isn’t easy either. That said, investors often find that information flow from the US is much higher when compared to other foreign markets.

As Mr. Vishal Gulechha, Executive Vice-President and Head - Equities, ICICI Securities, points out, “Availability of more information and immediate news flow from US companies attracts 90% of the volume towards the US markets.”

Finally, if you wish to take out money from your account, an online request is sufficient and the money can be brought back into your domestic account immediately on the same day or within three business days.

Src: The  Hindu, GURUMURTHY K

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