US stocks a click away

MUMBAI: Do you want to own a bit of Microsoft or Google? Or any of those global behemoths that trade in the US stock markets?

Buying and owning shares of Fortune 500 companies listed in the US is now just a click away.

ICICI direct.com has tied up with Penson Financial Services Inc, a US-based broker-dealer firm, to launch its overseas trading service that will allow individual resident customers (the service is not available for corporates, partnership firms, HUFs, trusts, and NRIs), to buy and sell equities, ETFs and transact in stock and index options across all US stock exchanges.

Recently, the Reserve Bank of India (RBI) doubled the remittance limit of resident individuals to $200,000 per financial year (April to March) outside India.

Those wanting to invest in securities and options can now use the trading platform launched by ICICI direct.com <http://direct.com>.

According to S Mukherji, managing director and CEO, ICICI Securities, “We believe Indian investors are looking at diversifying their portfolios and this Overseas Trading Service (OTS) enables them to do so.

The US equities markets are the most liquid and deepest in the world and allows investors to spread country and sector risks more effectively.

Similarly, these customers could also invest in sectors which are under-represented in India, like bio-technology and Internet-based companies, thereby spreading their risk more effectively.”

He added that non-US listed companies account for around 40% of the total market capitalisation in the New York Stock Exchange (NYSE). This means one will get access to securities like ADRs of companies from around the world. “It’s indeed your window to the world.”

This window comes at a price.

The OTS is available to individual customers of ICICIdirect.com for a one- time fee of Rs 999.

An account opening form needs to be filled in and submitted along with a copy of your passport or driving licence. A PAN card will also do, but a separate address proof will have to be produced.

Those who do not have an account with the brokerage will first need to open a 3-in-1 trading account.

To fund this account with US dollars, money can be remitted by a wire transfer facility offered by the ICICI Bank in one of its nominated branches.

However, if you want to realise the profits and withdraw your money to India, a withdrawal request to the brokerage will do.

This transfer can be made at one go and stocks can be bought from this corpus.  Alternatively, one can make fresh remittances as and when one wants to buy securities.

In the first case, one can save on the remittance fee one needs to pay the bank for every transaction. However, in a scenario where the rupee is getting stronger, there is a possibility that one may get more dollars, if you defer the transaction to the date when you actually want to buy the share.

Every time you make a trade, you will be set back by 75 bps of the trade value or $9, whichever is higher. /R

“Charges in the US range from $5-34. Our pricing is competitive,” said Anil Kaul, director and CEO, retail, ICICI Securities.

At $200,000 a head, a household of five can invest a million dollars (Rs 4 crore).  This is a considerable sum and will allow you to own a decent portfolio in the US markets, say experts.

The profits made out of such investments would attract capital gains tax, both short-term and long-term, as per existing regulations.

However, these investments would not be eligible for tax exemptions that investors in Indian equities enjoy.

Kanu Doshi, chartered accountant and managing partner, Kanu Doshi & Associates, says, “By the nature of transaction which does not involve trade in an Indian exchange or payment of STT, the profits made will not be eligible for concessional tax treatment under Section 111-A for short-term capital gains and Sec 38 (10) for long-term capital gains.”

Reliance Money had earlier tied up with London-based CMC markets to offer contracts for difference (CFD) product to enable trading in global shares.

However, the product did not take off since such the instrument involved margin trading barred by RBI regulations subsequently.

What you can buy?

US stocks, including listed ADRs
Exchange traded funds
Stock options
Index options
 
What you can’t?
Short selling
Margin trading
 
Charges
Account opening :Rs 999 (one-time)
Transaction : 75 bps of trade value or $9, whichever is higher