How to Buy Indian Stocks

Co-authored by Marcus Raiyat

Last Updated: April 4, 2021 References

Whether you are an Indian resident or live halfway around the world, India’s stocks are one of the hottest global investments at the moment. If you want to invest directly on Indian stock exchanges, start by monitoring the movements of the Sensex and Nifty stocks. As an American or other foreigner looking to invest, it’s important to contact a broker for guidance early in the process. No matter your status, you’ll likely need to open unique trading and banking accounts to buy Indian stocks directly.

Method 1

Method 1 of 2:

Investing Directly on Indian Stock Exchanges

1
Track the movements of Sensex and Nifty stocks. The movement of the Bombay Stock Exchange is indexed by the changes occurring to 30 Sensex stocks. The NSE’s movement is tracked by 50 stocks that comprise the Nifty. These stocks represent large, generally stable companies and are a good investment option for beginners to the market.^{[1]
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- For example, Coal India, Ltd., and the State Bank of India are both listed on the NSE.
2
Research possible stocks. Go online and read financial reports or stock analyses created by financial advisors. Look for news that specifically involves Indian stocks. Search google for “Indian stock news” and read the latest accounts. If you have a broker, compare what you’ve learned with what they know about the market.^{[2]
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- If you can find a company’s annual or quarterly reports online, they will often contain important information regarding revenue and net income.
- Finding out what you can about a company’s management team may also help you to decide whether or not to invest. For example, if they are led by Chief Financial Officer known for success, then the odds of the stock rising is more likely.
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3
Work with an Indian broker. When you are ready to start buying and trading, reach out to a brokerage company based in India. They will be able to guide you in preparing any necessary taxation documentation. They can also help you to open any additional savings or banking accounts that will be necessary for trading.
- If you think that you’ll need advice for trading, it’s best to choose a full service broker. A discount broker will only provide minimal trade assistance.
4
Register for a PAN (Permanent Account Number) card. Go to the PAN Services Unit Website and download the necessary forms. Fill out the forms and include proof of identity, address, and date of birth, along with 2 passport-sized photographs. Mail these documents to the PAN Income Tax Department address on the form.^{[3]
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- If you are going to buy Indian stocks, you must have a 10-digit PAN number. This allows tax authorities to track your investments and tax burden.
5
Open a savings or banking account. If you don’t have one in place already, you’ll need a banking account in order to transfer funds to your broker or brokerage site for stock purchases. Your profits can also be deposited in your banking account, if you’d like. Many people prefer to create a separate savings account specifically for stock trading.^{[4]
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Establish a Demat account. This is the account where your stocks will virtually reside after your purchases or trades. To open a Demat account you must fill out paperwork with a Depository Agency. They will then issue you an account number that you can use for trading purposes.^{[5]
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- You will also receive statements showing your account status and balance, just like you would with a standard bank account.
- The Depository Agency that houses your Demat account will likely charge you both maintenance and transfer fees. Make sure that you are clear about any fees or charges before creating your account.
7
Tell your broker which stocks to buy at which price point. The price of stocks continually fluctuates. So, you’ll want to determine at what point you’d like your broker or online brokerage account to make a purchase for you. Then, they will activate a buy order when the stocks reach that level. The same process goes for a sell order.^{[6]
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- For example, your broker can buy 10 shares of Sears Industries out of India at a particular price for you, as long as your account funds will support it.
8
Be aware of taxation rules in India. Your dividends earned from shares will generally be tax free up to a certain limit. You are also able to avoid a capital gains tax if you hold on to your shares for a profit after 1 year. If you make a profit from selling prior to 1 year, then you will owe a capital gains tax.^{[7]
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- Knowing the timetable for taxation may help you to plan when to buy and sell certain stocks.

Method 2

Method 2 of 2:

Buying Indian Stocks from the U.S.

1
Work with an in-person broker. Your financial advisor or bank can suggest a broker knowledgeable in Indian stocks who will be able to guide your investments. You can specifically request that your broker buy particular stocks, or you can let them follow an investment strategy based on your overall needs.^{[8]
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- A broker will usually charge a fee or hourly rate in return for their advice and services.
2
Use an online investment company instead. There are also a number of companies online that will guide you through the process of Indian investing for a fee. These companies are particularly useful if you have some experience with the market and would like more independence when trading.^{[9]
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- For example, Kotak Securities and IndiaBulls are 2 sites that allow for Indian stock trading.
3
Purchase American Depository Receipts (ADR). This is a fairly straightforward, low risk way to invest in foreign companies. An ADR becomes available when a U.S. company buys shares of a foreign company and then offers these shares up on the U.S. stock exchanges. You can then buy these shares in U.S. dollars, while still investing in foreign businesses.^{[10]
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- One advantage of working with ADRs is that they are priced in dollars and the dividends are delivered in dollars as well.
- ADRs are also available for trading during standard U.S. market hours.
4
Make arrangements with an Indian brokerage firm. If your U.S. broker is unable or unwilling to buy Indian stocks, then you can ask them to reach out to an affiliate firm in India for you. This firm will then set up an account for you and will brief you on their particular trading guidelines. Once you are familiar with their policies, you’ll need to discuss if they can access the shares that you are interested in.^{[11]
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5
Set aside a portion of your portfolio for Indian stocks. Investing in foreign markets, such as India, can seem a bit risky. To counter this risk, many people prefer to divide their portfolios between domestic and foreign stocks. Allocating 20% of your investments to Indian stocks allows you to reap profits while minimizing risk.^{[12]
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- Another strategy is to look for an underperforming Indian stock and to invest in it hoping to make a large profit if the company recovers.
6
Consider any investment limitations in foreign stock purchases. Indian stocks can be a great investment, but they do also come with a certain amount of limited control. It will be more difficult for you to potentially track the status of your invested companies with accurate or timely information. Your stocks may also come under Indian regulations that you may be previously unaware of.^{[13]
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- Keep in mind that you may end up paying more in transaction or brokerage fees when investing in foreign stocks.

Expert Q&A
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Question

What do I need to know about buying foreign stocks?

Marcus Raiyat
Foreign Exchange Trader
Marcus Raiyat is a U.K. Foreign Exchange Trader and Instructor and the Founder/CEO of Logikfx. With nearly 10 years of experience, Marcus is well versed in actively trading forex, stocks, and crypto, and specializes in CFD trading, portfolio management, and quantitative analysis. Marcus holds a BS in Mathematics from Aston University. His work at Logikfx led to their nomination as the "Best Forex Education & Training U.K. 2021" by Global Banking and Finance Review.

Marcus Raiyat

Foreign Exchange Trader

Expert Answer

Support wikiHow by unlocking this expert answer.

Keep in mind that you'll be exposed to the currency exchange rate. If the exchange rate drops by 20% and your stock goes up 20%, it could cancel out so you've made no money at all.
Question

Can foreigners buy Indian stocks?

Drew Hawkins1

Community Answer

Yes, foreigners can absolutely buy Indian stocks. You don't have to be an Indian resident either. The only requirement is that you open an account as a Foreign Portfolio Investor, or a FPI. You'll also need to register for a Permanent Account Number, or PAN card, which will allow tax authorities to track your investments and tax burden and is a requirement if you want to trade on the stock market. If you're just getting started, work with an Indian broker, who can guide you in preparing the necessary documents and help you open additional savings or bank accounts that you'll need in order to trade on the Indian stock market.
Question

Is it a good time to invest in Indian stock market?

Drew Hawkins1

Community Answer

Because India's economy is growing, it is a good time to invest in their stock market. Capital goods stocks and automobile stocks have been consistently on the rise and Indian stocks, in general, are one of the hottest global investments. If you're a foreign investor considering buying Indian stocks, get in touch with a local broker who can guide you through the process and help you file all of the necessary paperwork you'll need to legally trade on the market.

Warnings

Make sure to not overextend your budget when buying Indian stocks. Before you start trading, determine how much you can spend and stick to it.

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