Having one of the most vibrant stock markets in Asia, ways to invest in India are what most investors the world over are looking for. But before you take the decision to plough your funds into India, you need to check out the laws that are prevailing in your country and the investment regulations in India. Over the years, after the reform process took up pace, liberalization made the country come to terms with the world and globalization.
Types of investors
If you want to trade in stocks in India you need to open a demat account and home in to a broker with one of the two of the principal stock exchanges. Your broker should be a member of registered directly with the Security and Exchange Board of India of either the Indian stock exchange’s like the NSE (National Stock Exchange) or the Bombay Stock Exchange (BSE). If they are direct members, you can also open a direct bank demat account with them.
Usually, investors in any of the world’s stock markets are either individual or institutional. If you are investing on your own, you would be known as an individual investor while an institutional investor is a mutual fund or a company that is entrusted with the money of others. It could be domestic or foreign and as an individual, you could be a resident of India or a non-resident.
You could be in the business of managing other people’s money, a mutual fund or a pension fund. People may have entrusted their money with you for making it grow. That makes up four distinct types of investors in the stock market of any country and when they invest; they participate in as four different entities. If you compare India to the US or any other western country where restrictions are less and there is more freedom for investors, you could be a bit worried.
No need to worry
But, there is no need to worry as India has opened up in the last two decades and it is more easier and safer to invest in various Indian investment opportunities than in any other South Asian country. The economy is on reform mode and lots of new products, ideas and services are coming up with increasing regularity. As an emerging economy India has her share of rules and regulations, but when you look at the broader picture, the situation is more conducive to investment and laws are being tailored to make it more investor friendly.
If you are a resident of India, you have fewer restrictions and can invest directly and carry on trades in the stock market. You have considerable freedom although restrictions of SEBI and BSE/NSE would be applicable to you like they do for any other participant in the stock market. For insider trading you would be subject to the prevailing regulations by the bodies concerned. Mutual funds and financial companies can also invest in the stock market and buy stocks. If they wish, they can do it themselves if they are in conformity with the SEBI guidelines and regulations.
In the next category, falls the non resident Indians (NRI) and the FII or the foreign institutional investors. They could be individual NRI”s or they may manage and operate institutions that would be investing in stocks in India. If you are an NRI, you can directly buy and sell stocks through a stock exchange in India and stay invested. If you are not a citizen of India and have no ancestral ties with India, you would not be able to directly invest through the Indian stock exchanges.
But you can take a circuitous route by investing through ADR or American Depository Receipts or floated mutual funds by foreigners. As a FII or a foreign institutional investor, you can invest but you need to follow the regulations of the Reserve Bank of India and the SEBI.
A great investment broker from India is: NriInvestIndia.com