How to invest in US stock market from india: A beginner's guide

The US stock market dominates global finance, representing nearly 60% of the global market index. The New York Stock Exchange alone holds a staggering £20.7 trillion market capitalisation.

Your gateway to US stocks opens right from India. The Liberalised Remittance Scheme (LRS) allows you to invest up to £197,000 annually. The digital nature of US markets means seamless trading from your home, unlocking opportunities in high-growth sectors unavailable in domestic markets.

Smart investors recognise US markets as a cornerstone of portfolio diversification. Lower volatility compared to Indian markets makes US stocks particularly attractive for stable, long-term wealth creation.

This guide equips you with essential knowledge for investing in the US stock market. We'll cover everything from selecting the right broker to mastering tax rules and regulatory requirements. Ready to begin your investment journey? Let's explore.

Understanding the basics of US stock market

The US stock market thrives through two powerhouse exchanges: the New York Stock Exchange (NYSE) and NASDAQ. The NYSE, dating back to 1792, proudly stands as the world's largest stock exchange by market capitalisation. NASDAQ, launched in 1971, shines as the go-to platform for global technology leaders.

Key US stock exchanges and indices

Market performance tracking happens through three major indices. The S&P 500 keeps tabs on 500 large-capitalisation companies, while the Dow Jones Industrial Average (DJIA) focuses on 30 elite blue-chip firms. The NASDAQ Composite tells its own unique story, spotlighting technology and growth companies, with technology stocks making up nearly 60% of its listings.

Trading hours and time zone differences

US market activity buzzes from 9:30 AM to 4:00 PM Eastern Time, Monday through Friday [6]. Here's what this means for Indian investors:

Remember, daylight saving time (March to November) shifts market opening one hour earlier in IST [6]. Markets stay quiet on weekends and major US holidays.

Popular US stocks among Indian investors

Technology giants dominate Indian investors' US portfolios. The 2024 numbers speak volumes: Tech stocks accounted for 46.36% of total buy volume, with Nvidia leading the charge at 15.97% and Tesla close behind at 10.28%.

Exchange-traded funds (ETFs) also catch Indian investors' eyes. Top picks include:

• ProShares UltraPro QQQ (TQQQ)
• Direxion Daily Semiconductor Bull 3x Shares (SOXL)
• Invesco QQQ Trust (QQQ)
• Vanguard S&P 500 ETF (VOO)
• iShares Bitcoin Trust (IBIT)

The appetite for US exposure keeps growing - 44 Indian mutual fund schemes now park up to 30% of their assets in US equities. This shift highlights Indian investors' keen interest in global market opportunities.

Step-by-step guide to opening a US trading account

Ready to start your US trading journey? Here's your roadmap to opening a trading account smoothly and efficiently.

Choosing the right broker for US stocks

Your broker choice shapes your entire trading experience. Focus on these crucial factors during your selection:

• Trading Platform: Pick platforms with intuitive interfaces matching your trading approach
• Regulatory Compliance: Stick to brokers regulated by SEC or FINRA for maximum security
• Fee Structure: Study commission rates and spot hidden charges carefully
• Fund Transfer Efficiency: Check how quickly and easily you can move money internationally

Required documents and KYC process

Getting your KYC sorted is straightforward. Here's what you need:

1. Essential Documents:
   • PAN card proves your identity
   • Address proof through Aadhaar or bank statement
   • Tax ID (specific brokers might ask for this)
2. Account Verification:
   • Expect document verification within 1-3 business days
   • Choose your USD transaction banks wisely
   • Best options: HDFC, ICICI, IDFC, or Kotak Mahindra for online transfers

Account funding options and currency conversion

Moving money to your US trading account happens in clear steps:

Currency Conversion Process:

• Switch your INR to USD via your bank
• Daily exchange rates determine your conversion value
• Remember platform fees and GST in total costs

Transfer Methods:

• Use UPI if you bank with Axis, HDFC, or Federal Bank
• Other banks? Wire transfers work well
• Federal Bank offers smooth transfer solutions

Cost Breakdown:

• Platform charges: 0.75% or £7.50 (lower amount applies)
• Wire transfer fees: £5-20 each time
• Currency conversion cost: 3-5%

The LRS scheme lets you invest up to £197,000 yearly. Your funds usually land in your trading account within 3-5 business days.

Investment routes for Indian investors

Want to enter the US market? Here are three proven investment paths, each designed to match different investor preferences and goals.

Direct investment through international brokers

Global powerhouses like Interactive Brokers open doors to US markets, offering trading in over 10,000 US stocks and ETFs. These sophisticated platforms pack quite a punch with their features:

• Live market data at your fingertips
• Sharp, detailed charting tools
• Multi-currency trading support
• Seamless global market access

Plus, you'll find 90+ order types for precise trading strategies. Fancy moving beyond basic market orders? These platforms put professional-grade tools right in your hands.

Investing through Indian brokers with US partnerships

Prefer a more familiar path? Indian brokers with US ties might be your perfect match. You'll love how quick it is - just 5 minutes to open an account with basic KYC papers. These platforms shine with fractional investing, letting you grab a slice of premium stocks like Amazon.

The costs are transparent—expect to pay about 11 USD per withdrawal when moving money back to Indian accounts. Year-end perks include neat consolidated statements, which make tax time less stressful.

Using mutual funds and ETFs for US exposure

Looking for expert guidance? Mutual funds and ETFs offer a smart, structured route into US markets. These investment vehicles pool resources from various investors to build robust portfolios.

The opportunity is massive - Indian mutual funds can pour up to £590.66 billion into foreign markets. Popular ETF picks include:

• ProShares UltraPro QQQ
• Direxion Daily Semiconductor Bull 3x Shares
• Invesco QQQ Trust

Mutual funds pack several winning features:

• Expert portfolio handling
• Built-in diversification
• Easy entry with lower investments
• Hassle-free tax management

These funds are perfect for hands-off investors, as they let professionals handle the heavy lifting. Start your journey with just £50 to access quality investment opportunities.

Navigating regulations and compliance

Success in US stock investing demands a solid grasp of regulatory requirements. Here's your essential guide to staying compliant while investing internationally.

LRS limits and RBI guidelines for 2024

The Liberalised Remittance Scheme (LRS) sets clear boundaries for your US investments. You can invest up to £197,000 per financial year in US stocks. This limit works the same for everyone - adults and minors alike - provided they hold valid PAN cards.

Watch out for the 20% TCS on remittances above £6,500 [16]. Don't worry, though - you'll get this back as a credit when filing your tax returns.

Key LRS rules to remember:

• Keep your capital account active for one year before your first transfer
• No margin trading allowed
• Avoid transfers to countries on the non-cooperative list

FATCA and CRS reporting requirements

FATCA rules mean business when it comes to international investments. Your financial details must reach tax authorities if you're dealing with US markets.

You'll need FATCA self-declaration for:

• Starting new accounts
• Changing existing account details
• Yearly compliance checks

CRS works alongside FATCA, helping countries share financial information smoothly. If you skip these requirements, your accounts might freeze or, worse, be suspended.

Documentation for tax compliance

Smart record-keeping keeps your tax compliance smooth. Choose between ITR-2 or ITR-3 forms based on your income profile.

Your tax paperwork checklist:

1. Schedule FA: List all your US stock holdings
2. Form 67: Your ticket to foreign tax credits
3. Schedule FSI: Track your capital gains
4. Schedule TR: Handle DTAA tax credits

Remember to report every US stock investment, profit or loss, in your tax returns. Also, keep your share counts and INR values spot-on for compliance.

For dividends, convert using the SBI TT buying rates from the last day of the previous month. For capital gains, carefully document every purchase and sale in INR.

Understanding tax implications

Smart tax planning makes a world of difference in your US investment success. Let's decode the tax puzzle to help you maximise returns and dodge unwanted surprises.

Capital gains tax on US stocks in India

Your holding period determines your tax burden. Hold stocks beyond 24 months, and Long-Term Capital Gains (LTCG) attract a 12.5% tax rate plus surcharge and cess. Good news - that's down from the earlier 20% under Budget 2024.

Sell earlier? Short-Term Capital Gains (STCG) join your regular income, facing your income tax slab rate. Here's the interesting bit - while the US skips capital gains tax for non-resident aliens, Indian tax rules still catch up with you.

Picture this scenario: You buy shares worth £42,190 and sell at £67,504. Your £25,314 profit escapes US tax. But Indian taxes? They'll depend on your holding period.

Dividend taxation and withholding tax

US stock dividends face a double-tax scenario:

1. US Withholding Tax: Expect a flat 25% cut at source
2. Indian Taxation: Your full dividend adds to your taxable income

Let's crunch some numbers: On a £8,438 dividend:

• US takes £2,109 (25%)
• You receive £6,328

Tax credit claims under DTAA

The India-US Double Taxation Avoidance Agreement (DTAA) saves you from paying twice [24]. Here's your action plan:

1. Submit Form 67 before your ITR
2. Add Schedule TR to your filing
3. Declare your gross dividend in Indian income
4. Work out tax based on your slab rate

Keep these ready:

• Form 67 (before ITR filing)
• Completed Schedule TR
• Foreign tax payment proof
• Gross income details

Missing US investment reports? Prepare for penalties. Play it safe - maintain clear records of every transaction, from purchase dates to dividend receipts, all in INR.

Managing risks and costs

Smart risk management makes the difference between average and exceptional returns in US stock investing. Let's master the essentials of protecting and growing your international portfolio.

Currency risk management strategies

Your returns dance to the tune of INR-USD fluctuations. Here's a fascinating example:

Put £3,500 in US stocks at £70/USD for 20 shares at $250 each. Selling at $300 per share yields:

• £10,000 profit at £60/USD exchange rate
• £130,000 profit at £80/USD exchange rate

Master currency risks with these proven strategies:

1. Dollar-Cost Averaging: Steady, regular investments smooth out exchange rate bumps
2. Currency Hedging: Seasoned investors might fancy futures contracts for protection
3. Gold Investment Balance: Gold ETFs offer natural dollar hedge protection

Transaction costs and hidden charges

Every penny counts when trading US stocks. Let's break down the costs that shape your returns.

Your cost checklist:

• Brokerage: Expect £167.92 per trade (buy/sell)
• Currency conversion: Budget for 3-5% of your transaction value
• Wire transfers: Set aside £500-£2,000 per move

Platform fees typically eat up 0.75% to 2% of the transaction value. Fancy frequent trading? Think twice - long-term positions often prove kinder to your wallet.

Portfolio diversification techniques

Smart diversification shields your wealth while maximising growth potential. Here's your sector spread strategy:

Sector wisdom:

• Technology: Commands 46.36% of buy volume
• Healthcare: Focus on pharmaceutical leaders
• Financial services: Banks and insurance giants
• Consumer goods: Retail and FMCG stalwarts

Want instant diversification? These ETFs lead the pack:

• ProShares UltraPro QQQ
• Direxion Daily Semiconductor Bull 3x Shares
• Invesco QQQ Trust

Your risk shield toolkit:

1. Geographic Diversification: Spread across US regions
2. Market Cap Distribution: Balance large, mid, and small-caps
3. Investment Style Balance: Mix growth with value

Though US markets show steadier nerves than Indian ones, keep your portfolio balanced. Cap single stock exposure at 1-2%. Schedule regular rebalancing. Add dividend stocks for steady income.

Watch your portfolio like a hawk. Global investing demands attention to worldwide economic signals and currency shifts. Your success hinges on mastering both market and currency dynamics.

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Moving ahead

Your US stock market journey starts here. Success awaits those who master the essentials - smart investment routes, solid risk management, and strict regulatory compliance.

Begin your adventure wisely. Pick quality stocks across sectors and market caps. Build your portfolio brick by brick. Keep your tax papers pristine and LRS guidelines close.

The US markets sparkle with possibilities. Through careful stock selection and thoughtful diversification, your wealth grows stronger. Patient investors who research thoroughly, watch markets keenly and stick to long-term plans often find the sweetest rewards.

Remember - market wisdom comes with time. Watch currency movements like a hawk. Adapt your strategy when markets shift. Your financial dreams deserve this dedicated approach to US stock investing.

Disclaimer: This guide provides general information, not financial advice. Consult a SEBI-registered advisor before investing. Past performance ≠ future returns. We assume no liability for investment decisions.

Contributed by Denila Lobo

Denila is a content writer at Winvesta. She crafts clear, concise content on international payments, helping freelancers and businesses easily navigate global financial solutions.