As a non-resident Indian (NRI), you might have observed the highs and developments in the Indian stock market and may now be interested in investing. But can NRIs do intraday trading and purchase stocks in the Indian markets?
There are several ways NRIs can engage in trading. This article will uncover regulations concerning NRI investments in the Indian stock market and answer the question, “Can NRIs do intraday trading?”
Engaging in NRI intraday trading is trickier than stock market investments in India. Investing entails acquiring securities and indulging in short- or long-term trading, while intraday trading requires you to close your positions by the end of the same day. Therefore, this type of trading is not allowed for NRIs because it is highly volatile nature, leading to investor risk exposure and market instability or fluctuation.
Let us explore this subject and break down other investing possibilities for potential NRI investors in India.
Also read: Stock market and commodity market
Methods for NRIs to make stock market investments in India
Here are three ways by which NRIs can invest in the Indian stock markets:
- By designating a mandate holder
As an NRI, it is recommended that you appoint a mandate holder. This individual manages your exchanges and accounts, making it easier for you to outsource your transactions and help with other account-related tasks. To appoint a mandate holder, you have to provide the bank with an application, all the required documents, and the person’s signature whom you have selected for this position. - By granting a POA or power of attorney
A power of attorney allows the individual to buy and sell on your behalf. This is another way for NRIs to make investments in the Indian market. They need to grant a POA to an Indian resident, and the agreement must be created on stamp paper, duly notarised, and submitted to the bank. - Using a brokerage firm
NRIs can also trade stocks in India through brokerage firms. If NRIs comply with the KYC compulsions and other compliance guidelines, brokerage firms can offer stock trading services as per RBI regulations.
NRIs can invest on a repatriable or non-repatriable basis
For NRIs, investing is possible on a repatriable or non-repatriable basis. In simple terms, repatriable investments allow NRIs to transfer their invested- funds outside of India, while non-repatriable investments do not allow the transfer of any kind outside of the country.
What is the PINS approval from the RBI?
PINS stands for Portfolio Investment Scheme. It is an account that holds the wealth invested by NRIs in India. All transactions with respect to trading take place through this account for the NRIs. RBI grants an approval to conduct these transactions.
Only certain banks have been granted permission to administer the approval. So, all that is required to be done is to check with your bank relationship manager or representative and seek help in getting the approval.
Also read: T2T stocks
Documentation required for initiating a Demat and trading account
To initiate a trading or Demat account in India, you will need to provide some documents and photocopies. These documents include the following:
- A clear copy of your PINS Letter and PAN card
- A FEMA declaration form to corroborate the source of your funds
- A copy of your foreign passport (only if you have citizenship of any other country) or
- Indian passport copy for Indian residents
- OCI or PIO card
- Please note that the Indian embassy in your resident country should notarise the photocopies of these documents.
You will also need to provide a copy of the overseas address proof, a cancelled cheque from your overseas bank account, and information about the accounts you intend to link to your trading and demat accounts. This includes details such as the names of the bank and branch, branch address, account number, and IFSC code. Finally, you will need to sign a FATCA declaration form in accordance with the PMLA Act.
Actual trading process for NRIs
NRIs can easily invest in the Indian stock market. You can follow the same procedure as an Indian resident. Simply choose the company you want to invest in and the number of shares you want to buy at a limit or given market price. Then, proceed with the investment and track progress at your convenience. The buying and selling of shares is easily done through trading and Demat accounts, where these shares are held electronically.
Rules and restrictions for NRI investors may vary, so it is advisable to consult with your broker before investing to avoid penalties. For your trading account to be credited, you must transfer funds into your NRE or NRO account. When you make a transaction, your broker will inform you and the bank with the PINS account, after which your PINS account will be credited or debited. You can safely and effectively invest in the Indian stock market by adhering to these rules.
Some key aspects for NRIs trading in Indian equities
Can NRIs do intraday trading in India? The answer is no; however, NRIs can trade and invest in equity shares, ETFs, mutual funds, equity derivatives, and bonds. That said, it is necessary to consider a few important points pertaining to investing in India.
- Similar to Indian residents, you will incur taxes on both short- and long-term returns or capital gains.
- Only after the TDS deduction can dividends be paid to you or the NRI investor for mutual fund investments.
- Obtain your custodial participant (CP) code before being able to start F&O trading as an NRI.
- Participation in BTST, intraday, and STBT trading is not permitted, and neither is short-selling.
- Trading in currency derivatives and commodities in the F&O segment is not allowed.
Also read: Types of stock trading
Conclusion
Non-resident Indians possess almost identical rights as Indian citizens (based in India) when it comes to investing in the Indian stock market. However, as they reside in another country, they must comply with stricter rules and regulations. There are also some dos and don’ts to remember; for instance, can NRIs do intraday trading in India? The answer is no.
That said, initiating stock trading in India is less complicated than one may think. So, while the answer to the question, ‘can NRIs do intraday trading in India?’ may not be in the affirmative, they can still reap the benefits by investing in the stock market. The process might differ compared to that of Indian citizens, but NRIs can invest in Indian stock markets in other ways by following the guidelines listed specifically for them.
