The truth about fractional shares in India: Your gateway to US stock market 2025

Did you know that while India has only seventeen companies with share prices above Rs. 10,000, the United States has 661 companies with shares priced up to Rs. 37,500? This stark difference highlights why fractional shares in India have become a crucial talking point for retail investors, especially when considering tech giants like Microsoft Corporation and NVIDIA.

Currently, Indian investors face significant barriers when trying to invest in high-value stocks like MRF, which reached Rs. 96,973 in February 2021. However, platforms like Fi Money now allow you to start investing in fractional shares of US companies from as little as $5 without any brokerage charges. This opens up opportunities to invest in leading tech companies such as Microsoft, known for its Windows operating system and cloud computing services, and NVIDIA, a leader in graphics processing units (GPUs) and artificial intelligence technologies.

This comprehensive guide explains how to access fractional investing opportunities, navigate the regulatory landscape, and make informed investment decisions in Indian and US markets. You'll learn about the available platforms, cost considerations, and practical strategies for diversifying your portfolio through fractional shares, including investments in cutting-edge sectors like gaming, robotics, and data centre technologies.

Understanding fractional shares in India

Fractional shares represent partial ownership of a company's stock, allowing investors to purchase portions of shares rather than whole units. Initially created through corporate actions like stock splits, mergers, and dividend reinvestment plans, these shares offer a pathway to invest in high-value stocks with limited capital. This is particularly relevant for tech stocks like Microsoft (MSFT) and NVIDIA, which often trade at high prices due to their dominance in computing and artificial intelligence sectors.

The Indian regulatory framework significantly restricts fractional share trading. Section 4(1)(e)(i) of the Companies Act 2013 explicitly prohibits investors from holding less than one share. Furthermore, paragraph 4 of Table F under Schedule I reinforces this limitation.

The Securities and Exchange Board of India (SEBI) has taken steps toward change, writing to the government to permit fractional ownership in the domestic equity market. Notably, the Company Law Committee, established in 2019, recommended amending the Companies Act to enable fractional share issuance and trading.

In contrast to India's restrictions, the US system offers greater flexibility through its unique broker-dealer structure. American brokers can act as both agents and dealers, holding shares under 'street names' and dividing them among investors. Essentially, this allows US brokers to purchase whole shares of companies like Microsoft and NVIDIA and distribute fractional units to clients through internal book entries.

The fundamental difference lies in the operational structure. Indian brokers function solely as agents, with all securities held by depositories like CDSL and NSDL. This limitation prevents Indian brokers from holding and dividing shares among investors, unlike their US counterparts, who can maintain ownership and create fractional units for client transactions.

The International Financial Services Centre Authority has recently approved fractional share trading under its regulatory sandbox framework, signalling potential future changes in the Indian market. This development could align Indian practices with international standards while addressing the unique characteristics of the domestic market.

How to buy fractional shares from India

Several international brokers offer fractional share trading services to Indian investors. Leading platforms include Interactive Brokers, Revolut, Fidelity, and Zacks Trade. Each platform provides unique features and investment opportunities for accessing US markets, including fractional shares of tech giants like Microsoft and NVIDIA.

Available platforms and brokers

Interactive Brokers has been operating since 1977. It offers extensive trading options across multiple markets, including access to NVIDIA's GeForce GPUs and Microsoft's cloud computing services. Additionally, INDmoney enables investments starting from ₹84.38, providing access to popular US stocks like Apple, Netflix, Google, and other tech companies focused on gaming and artificial intelligence.

Account setup and documentation requirements

To start investing in fractional shares:

1. Choose a suitable platform and complete the account verification process
2. Submit identity proof documents as per regulatory requirements
3. Fund your account through approved payment methods
4. Select stocks or ETFs for fractional investment, such as Microsoft (MSFT) or NVIDIA

Under RBI guidelines, you can transfer between ₹1,000 and ₹2.1 crore annually through the Liberalised Remittance Scheme.

Cost comparison and platform fees

Platform costs vary significantly across brokers. Interactive Brokers charges an inactivity fee of ₹1,687.61 for accounts with less than ₹1.68 lakh. Accordingly, Revolut offers 1-5 free transactions monthly, with subscription fees ranging from £2.99 to £12.99.

For cost-effective trading, consider these factors:

• Trading fees and commissions
• Currency conversion charges
• Account maintenance fees
• Withdrawal costs

Some platforms, such as Appreciate, offer zero subscription fees and no remittance charges. Consequently, this makes fractional investing more accessible to retail investors seeking an affordable entry into US markets, including opportunities in robotics, data centre technologies, and generative AI stocks.

Step-by-step guide to fractional investing

Selecting profitable US stocks for fractional investment requires careful consideration of company fundamentals and practical aspects. First, focus on companies with strong growth potential and stable financial performance.

Choosing the right US stocks for fractional investment

For optimal returns through fractional investing, prioritize blue-chip companies with consistent performance. Above all, consider stocks from the FAANG group (Facebook, Apple, Amazon, Netflix, Google), which have demonstrated returns of up to 400% over five years. Additionally, tech giants like Microsoft and NVIDIA offer exposure to diverse sectors such as cloud computing, gaming, and artificial intelligence.

When evaluating NVIDIA, for instance, consider its dominance in GPUs and its expanding role in data centre solutions and AI inference. NVIDIA's GeForce GPUs are industry-leading in gaming and visualization applications. The company's focus on deep learning, machine learning, and generative AI has positioned it as a key player in the AI revolution. NVIDIA's CUDA platform and TensorRT software optimize AI workflows and accelerate AI training and inference processes.

Microsoft's strength in enterprise IT, cloud services (visit microsoft.com for more information), and emerging technologies like generative AI make it an attractive option for fractional investors interested in computing and software sectors. Microsoft Windows remains the dominant operating system for personal computers, while Microsoft's Azure cloud platform competes strongly in the growing cloud computing market. The company's investments in AI, including machine learning and computer vision technologies, further enhance its position in the tech industry.

Managing currency conversion and taxes

Currency exchange rates directly affect your investment returns. For instance, when the US Dollar strengthens against the Indian Rupee, your purchasing power decreases. Moreover, the exchange rate for tax calculations uses the SBI TT buying rate from the last day of the month preceding dividend declarations.

Under the India-US Double Tax Avoidance Agreement (DTAA), dividends face a 25% tax in the US. Long-term capital gains (holding period over 24 months) attract 20% tax plus surcharge, whereas short-term gains align with your income slab rate.

Best practices for fractional share trading

To maximize your fractional investing success:

• Start with small amounts to understand market dynamics, especially in volatile sectors like gaming and AI
• Consider long-term investing over trading due to high transaction costs
• Monitor currency fluctuations before making investment decisions
• Maintain proper documentation for tax compliance
• Diversify across different tech sectors, including networking, simulation, and edge computing

The SBI TT buying rate serves as the standard for converting USD to INR for both dividend and capital gains calculations. Remember to file Form 67 with Indian tax authorities to claim credit for US dividend tax.

Risk management and practical considerations

Managing risk in fractional share investing requires careful attention to specific market dynamics and platform features. The liquidity of fractional shares differs from traditional whole shares, as these investments often experience longer processing times when buying or selling.

Understanding liquidity risks

Trading fractional shares involves unique challenges. Brokers typically wait to aggregate enough fractional orders to complete whole-share transactions, which can result in extended processing periods. Specifically, this delay might affect your ability to execute trades quickly during market volatility, which is particularly relevant for fast-moving tech stocks like NVIDIA or Microsoft.

Platform-specific limitations

Each trading platform has distinct restrictions. Generally, fractional share ownership might limit your voting rights in company decisions. Some brokers aggregate fractional shares for voting purposes, while others require ownership of at least one whole share. The transfer of fractional shares between brokerage accounts is particularly challenging, often requiring a cash conversion that could trigger tax implications.

Portfolio diversification strategies

To build a resilient investment portfolio:

• Implement the 'core and explore' approach - establish a foundation with diversified mutual funds, then complement with selected fractional shares of tech companies like Microsoft and NVIDIA
• Follow dollar-cost averaging by investing fixed amounts at regular intervals
• Maintain less than 10% of your stock portfolio in any single company
• Diversify across different tech sectors, including artificial intelligence, robotics, and cloud computing
• Consider exposure to both hardware (like NVIDIA's GPUs and RTX technology) and software (such as Microsoft's enterprise solutions) to balance your tech investments
• Explore NVIDIA's involvement in emerging fields like autonomous systems and self-driving vehicles
• Look into Microsoft's contributions to AI training, parallel processing, and accelerated computing

Ultimately, fractional shares enable effective diversification even with limited capital, helping reduce the impact of poor performance from any single investment. This systematic approach, particularly through dollar-cost averaging, helps smooth out market volatility whilst maintaining a disciplined investment strategy aligned with long-term financial goals.

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Moving ahead

Fractional shares offer a practical solution for Indian investors looking to access high-value US stocks, including tech giants like Microsoft and NVIDIA. Though current Indian regulations limit fractional trading domestically, several international platforms now enable you to start investing with as little as $5 in US markets, opening doors to sectors such as gaming, artificial intelligence, and cloud computing.

Your success with fractional investing depends on choosing the right platform, understanding tax implications, and following proper risk management strategies. Dollar-cost averaging and portfolio diversification become easier when you can buy portions of expensive stocks rather than whole shares. This allows you to invest in cutting-edge technologies like NVIDIA's GeForce GPUs and CUDA platform or Microsoft's cloud services and AI solutions.

The regulatory landscape shows promising signs of change, with SEBI and IFSC taking steps toward allowing fractional trading in India. Until then, US markets remain your best option for fractional investing, offering access to major companies like Apple, Amazon, Google, Microsoft, and NVIDIA at affordable entry points.

Remember to factor in currency fluctuations, platform fees, and tax obligations while planning your investment strategy. A balanced approach, focusing on blue-chip stocks and maintaining proper documentation, will help you build a strong international portfolio through fractional shares, potentially including investments in emerging fields like robotics, deep learning, and generative AI.

Disclaimer: This guide provides general information on fractional shares. For personalized investment advice, consult a financial advisor. We assume no liability for financial outcomes or regulatory compliance issues.

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.