Why You Should Invest In US Stock Market From India?
The US market consistently outperforms the Indian market over the last 10 years. Let’s have understanding the basics of US stock markets before knowing “How to invest in US stock market from India?” or “How can I buy US stock in India?”
Since when India liberalized foreign investment policy, and we then start getting FDI in India from American companies. Many US products we consume day to day basis in and day out! If we are the consumers of those products, why not become the owners of those products companies? Many Indians who are going crazy behind US stock probably because of currency exchange benefit, just increase on 1 $ directly get converted in 70 to 80 INR bracket.
But we should understand the basics of US stock markets before we start investing. We will also address the main question that “How to invest in US stock market from India?”
Let’s Understand US Stock Market
To make understanding easy we will compare apple to apple, means let’s compare Indian stock markets to US stock markets. So let’s talk about the differences
Difference in Exchange
Very first point of difference is that in India, we have BSE and NSE, Bombay Stock Exchange and National Stock Exchange. In USA, they have NYC and NASDAQ stock exchanges similar to India. So these are the major stock exchanges.
Difference in Market Time
The second point of difference is , In India, markets are open from 9:15 AM in the morning to 3:30 PM in the afternoon, and US stock market open from 9:30 PM IST in the morning to 4:00 AM IST in the early morning approximately.
Difference in Indices
Third point, In India stock market we call them as index indexes, the major stock market indices in India, Sensex and nifty right. Index is Sensex NSE is indexes nifty. Whereas there are approximately 5,000 U.S. indexes but most widely followed indexes in the U.S. are the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite.
Difference in Circuit Breaker Percentage
The major and important difference is a circuit filter or breakers, it means that the market halts or stops after certain conditions are hit. If markets crash by 10%, there's a halt at 15% another halt and if market crashes by 20%, market stops for the entire day. These are the levels of fault or stoppages. In USA, these levels are 7% 13% and 20% to halt the market.
Difference in Buying Quantity
The biggest point of difference in Indian stock market and US stock market is that can we invest in fractional shares in US market, but this is not possible in Indian share market as of now. Hopefully it will come in future. So what is shares in fraction means? ,
Let’s assume that you want to buy India’s most expensive MRF share which is around 77,000 INR+ for one share. Very few people will be afford the share but what if India stock exchange allow us to buy share let’s say of amount 1000. So you will get fraction of 1 MRF share which is 0.012987. This is possible in US stock markets, to buy shares in fraction.
Stock Market Regulator
Last but not least the regulator of the capital markets in India is The Securities and Exchange Board of India SEBI whereas in USA it’s The Securities and Exchange Commission (SEC)
Hopefully now it will be clear the differences & comparison in INDIA & US. The comparison of circuit filters or market wide circuit breakers in India versus USA.
Now, let's deep dive and understand the two major stock exchanges in US. One is NYC and one is NASDAQ. So let's compare them one by one.
NYC versus NASDAQ
NYC was founded way back in 1792 and it is one of the oldest stock exchanges. NASDAQ was founded in 1971. It is world's first and largest electronically traded stock market. NASDAQ and NYC both are huge in their market capitalization of $25.3 Trillion where as India is 3.1 Trillion approx.
Right now NASDAQ has 3300 companies, which are currently listed and NYC has 2800 companies listed. NASDAQ has more of technology based companies are listed, whereas NYC, has more of blue chip industrial companies.
No More Physical Trading
Now days there are no physical trading floor NASDAQ in US and in India as well. But NYC even today has a physical trading floor means brokers buy and sell shares physically maybe just as a part of that tradition, because the overall volume of physically traded shares is very tiny as compared to the total volume of the exchange.
So in NYC, the stock biggies are Berkshire Hathaway, Alibaba Group holding company, Johnson and Johnson, JPMorgan Chase and company, Exxon Mobil Corporation, Bank of America, Walmart stores, Inc., Wells Fargo and company, Visa Inc, Procter and Gamble Company, AT&T Inc., and Pfizer which are blue chip traditional companies.
Operational Comparison of US Stock Market & India Stock Market
NASDAQ holds which types of companies? Those are all big names & brands! It's Apple, Amazon, Microsoft, Alphabet (Google), Tesla, Facebook, NVidia, PayPal Netflix, Intel, Adobe, Zoom. But did you notice the difference why Apple was not listed in NYC?. These were not listed in NYC these are listed in NASDAQ. Does this happen in Indian stock market? No. So let's understand how Indian stock market really works.
Now, let’s take some examples of companies which are listed in BSE versus which are listed in NSE. All these big stocks in BSE we have reliance, TCS HDFC Bank, Infosys HDFC, Kotak, ICICI, Bharti Airtel, Mahindra SBI, Bajaj finance, which are the companies in NSE as well. In India, all the stock are listed are exactly the same in BSE, as well as in NSE.
So now let's move on with comparing the indices. Like as we discussed earlier, India has BSE and NSE. USA has three major stock market indices, which are DJI, Dow Jones Industrial Average, NASDAQ, S&P 500.
We will not talk about that index right now. We are going to focus only on top three. So let's understand them one by one.
Now let's start with understanding the Dow Jones Industrial Average it is also called as Dow 30.It tracks 30 blue chip companies which are listed on NYSE and NASDAQ.
In India we have Sensex which tracks companies on BSE, and we have nifty which tracks companies only on NSE. So in indeed something like there is an index which is related to a specific stock market. Is that a case in USA? No. Again, an interesting point of difference. Dow Jones tracks top 30 companies which 30 companies from NYC as well as from NASDAQ.
Price Weighted Index
Hope you understood this amazing difference in INDIA & USA stock market. So it tracks the top 30 companies well taken. What's one more important point of Dow Jones it is a price weighted index. What is meant by price weighted index? .The stocks which have higher prices will be given more weightage stocks with lower prices will be given comparatively lower rates.
Now, what does NASDAQ represent? NASDAQ represents an index of more than 2500 companies, tracks only those companies which are listed in NASDAQ. It is the name of that index as well as the stock exchange. So like in India, we have BSE whose index is Sensex we have NSE whose index is Nifty, but in USA NASDAQ is the name of the index as well as the stock exchange.
DIffrence in Coverage
What is one more important aspect is that NASDAQ not only covers those companies which are listed in NASDAQ, but which are headquartered even outside USA. In India, we take only those companies which are registered in India only. What does NASDAQ cover the top 500 companies, which may or may not be headquartered or originated in USA? NASDAQ is a market cap weighted index. As said Dow gives more importance to price, but NASDAQ gives more importance to market capitalization.
US Stock Market Index
Now, let's talk about the last index, which is S&P 500 index, the full form is Standard and Poor's 500. S&P doesn't track the income levels, but it tracks 500 largest US publicly traded companies. These companies have to be headquartered in USA. This index is also a market cap weighted index means what it will give more importance to market capitalization rather than price of stocks.
How to Invest In US Stock Market from India?
Now coming to biggest question, how to invest in US stock Market from India? Companies which are listed in USA? To buy US shares you need to open an account in specific brokers or apps only who deal in US stocks.
What are the different ways you can invest in the US stock market from India?
There are 3 ways to invest in IS stock market from India
- Open DMAT account from bank which trade in US stock market , but its not recommended as it come with heavy brokerage and transaction charges.
- Open Account with Stock Broker-You will have to directly open trading accounts with brokerage firms which will allow you to invest in the US market. You will have to take clearance from RBI to open right bank account in the US. Once the US stocks account is opened, you can trade in US market. But this is very complicated and tedious procedure.
- The easiest and economical way of investing in US stock Market from India is through App
Hence we would recommend INDmoney for investing in US stock market. You can open an account FREE of cost in just few steps. Not only the account is free but also you won’t be charged brokerage even when you buy or sell US shares.
You can do all your financial activities at one place so you get entire 360 degree view of your all investment like shares , mutual funds, FD’s , Crypto and off course US stocks.
Other Important Benefits of INDMoney
- Track your Indian stock as well by integrating your Zerodha account.
- You can see your Credit score for FREE
- Track your Provident Fund (PF)
- You will get all notification like below and by email , about shares, Crypto , and credit cards etc.
- Not only you can buy US shares but you can purchase crypto currency as well.
Get your first 250 INDcoins free which you can use for buying Bitcoin
- You can also apply for an US market IPO’s
And the BIGGEST advantage is since you have to buy US shares in dollars you don’t need to go to your bank physically to wire money in your INDmoney app.
How to Register on INDMoney on App?
- Download INDMoney app from Google Play store.
- Enter your India mobile number
- Get OTP and enter
- Complete KYC
- Add your bank details
- Add funds and now you are ready to buy US shares or cryptos!
Sign-up Vested Free and get 5$ in your account by using below code
So lets get started , and start investing in US market!
Write below your opinion about investing in US stock market, any valuable information in comment I will reply and include in the article.