Investing in US stocks from India? How much can you invest, can you directly apply for IPOs? Complete guide here
Investing in foreign stocks from India allows investors to participate in the growth of some of the world’s most recognised companies, such as Apple, Meta and Amazon. It also provides exposure to popular sectors such as artificial intelligence (AI), which may have limited investment options in India.
Several regulatory channels are available to Indian residents looking to invest in international stocks. Access to overseas markets, including the United States, has become easier through the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) and investment platforms operating through GIFT City.
How much can an Indian investor invest abroad?
The RBI’s LRS route allows you to remit up to $250,000 per financial year for permitted purposes, including investments in foreign stocks and overseas-listed exchange-traded funds (ETFs), as well as expenses such as travel and education.
The entire $250,000 limit can be used for investments in the US market if the investor does not need to use any part of it for other permitted overseas expenses during the specified financial year.
Can you directly apply for foreign IPOs?
As Claude-maker Anthropic, headed by Dario Amodei, moves closer to a stock market debut, with a Nasdaq listing reportedly targeted for the end of November, Indian investors may be wondering if they can buy its shares at the offer price.
Like we already discussed, Indian residents are permitted to invest in overseas securities, subject to applicable rules. However, accessing a US IPO can be challenging as unlike India, the US market does not have a fixed retail or foreign retail quota for initial public offerings (IPOs).
Most US IPOs allocate around 90% of their shares to institutional investors, such as pension funds, hedge funds and large asset managers and the remaining 10% goes to US retail investors, according to a blog post by INDmoney. Indian retail investors are not part of that retail allocation, it added.
Even US retail investors often receive fewer shares than they apply for, or none at all, as popular IPOs are heavily oversubscribed and allocations can be limited to just a handful of shares per applicant.
While the Securities and Exchange Board of India (Sebi) mandates that at least 35% of an issue must be reserved for retail investors, the US has no such requirement. Investment banks acting as underwriters manage IPO pricing and share allocation, often prioritising institutional investors.
If you still want to invest in a US company, you can buy its shares after the stock starts trading on a public exchange. Once a US company completes its IPO, its shares start trading on the NYSE or NASDAQ from the next morning.
For investors in India, US stock trading begins at 7:00 PM IST on the listing day (this shifts to 8:00 PM IST from November to March because the US observes Daylight Saving Time between April and October). Indian investors can purchase shares through brokerage platforms that offer access to US markets.
