Lyla Lindsey
India is the world's fastest-growing economy, and its financial system ranks seventh in total assets among global financial systems. The country has a large population of STEM graduates, all fluent in English, and the government has made great strides in upgrading the country's physical and digital infrastructure. Australians can invest in Indian stocks, although the options are limited. The simplest way to invest in the Indian stock market from Australia is by buying an ASX-traded ETF. There are three major Australian ETFs that track the performance of the Indian stock market: The IIND ETF, the NDIA ETF, and the Nifty 50 ETF.
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What You'll Learn
Investing in Indian stocks from Australia
For Australians, investing in Indian stocks is a great way to diversify their portfolios and gain exposure to one of the world's fastest-growing economies. While options are limited, there are a few ways to invest in Indian stocks from Australia. Here are the key methods and considerations:
Exchange-Traded Funds (ETFs)
The simplest way to invest in Indian stocks from Australia is through Exchange-Traded Funds (ETFs) that are traded on the Australian Securities Exchange (ASX). ETFs offer the advantage of being bought and sold like any other stock listed on the ASX, providing easy access to the Indian market for rank-and-file investors. There are several ASX-listed ETFs that provide exposure to Indian stocks, including:
- BetaShares India Quality ETF
- Global X India Nifty Fifty ETF
- NDIA ETF
- IIND ETF
Foreign Portfolio Investment Scheme
Foreign investors can also purchase shares in individual Indian companies through the Indian Foreign Portfolio Investment (FPI) scheme. This option may be more complex than investing in ETFs, but it allows investors to buy stocks in specific Indian companies that align with their investment goals. FPI investments can be made through custodian banks like Citi Bank and Deutsche Bank or registered brokers like Jarvis Investments.
Nifty 50 Index
The Nifty 50 is India's benchmark stock market index, representing the 50 largest Indian companies listed on the Indian stock exchange. Investors can gain exposure to the Nifty 50 through globally-traded ETFs, such as the Global X Nifty 50 ETF, which tracks the performance of the index.
Important Considerations
When investing in Indian stocks from Australia, it's important to consider the potential impact of taxes, brokerage fees, and other costs. Additionally, investors should carefully research the Indian market, including its economic trends, political environment, and sector-specific risks, to make informed investment decisions.
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ASX-listed ETFs that include Indian shares
Exchange-traded funds (ETFs) are a great way to get exposure to the Indian stock market. ETFs are managed funds that trade on the ASX just like ordinary shares.
There are two ASX-listed ETFs that include Indian shares: the BetaShares India Quality ETF and the Global X India Nifty Fifty. BetaShares' IIND ETF holds a portfolio of the top Indian companies ranked by quality score, with a focus on financial services, consumer and information technology companies, including Infosys, Tata Consultancy Services and Axis Bank. The Global X India Nifty Fifty ETF, on the other hand, tracks the performance of 50 of the largest companies on the Indian stock market, which make up the Nifty 50 index.
There are other ways to invest in Indian stocks from Australia, such as buying stocks in individual companies listed on Indian stock exchanges or investing in globally-traded Indian stock ETFs like the Global X Nifty 50 ETF. However, these options may be more complex and may not offer the same advantages as ASX-listed ETFs.
When investing in ASX-listed ETFs that include Indian shares, it is important to consider the risks associated, such as market risk, index methodology risk, international investment risk, concentration risk and currency risk. It is also important to remember that the investment value can go up and down and that the performance quoted represents past performance, which does not guarantee future results.
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Globally-traded Indian stock ETFs
For Non-Resident Indians (NRIs) living in Australia, the simplest way to invest in Indian companies is via globally-traded Indian stock ETFs. ETFs are bought and sold like any other stock listed on the Australian Stock Exchange (ASX), offering huge advantages to rank-and-file investors.
There are several globally-traded Indian stock ETFs that investors can choose from. These include the Global X Nifty 50 ETF, BetaShares India Quality ETF, MSCI India Index, and WisdomTree India Hedged Equity Index. The Global X Nifty 50 ETF and BetaShares India Quality ETF are ASX-listed ETFs that include Indian shares. The MSCI India Index is a stock index that tracks the performance of large and mid-cap companies, while the WisdomTree India Hedged Equity Index ETF seeks to track the price and yield performance before fees and expenses.
International ETFs are another option for investors looking to diversify their portfolios with exposure to global markets. These ETFs invest in companies outside of India, providing access to international growth opportunities.
To invest in Indian stock ETFs, investors can follow these steps:
- Sign up with a share-trading platform.
- Fund your account.
- Search for the Indian stock ETF you want to buy.
- Enter the amount you want to invest and hit "Buy".
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Investing in Indian mutual funds
Non-Resident Indians (NRIs) can invest in Indian mutual funds, although there are some rules and tax implications to consider. Firstly, you should be classified as an NRI under the Foreign Exchange Management Act (FEMA) guidelines. This means you must be a citizen of India residing outside of the country. Secondly, you must have an active Non-Residential External (NRE) or Non-Residential Ordinary (NRO) bank account in India, as you cannot invest in mutual funds in a foreign currency. You will also need to complete Know Your Customer (KYC) compliance, which includes submitting a copy of your passport, proof of address, and date of birth. Some fund houses may also require in-person verification.
It is important to note that there are some restrictions on NRIs from the United States and Canada investing in Indian mutual funds. This is due to compliance requirements under the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). As a result, some leading banks and brokers do not allow NRIs from these countries to invest in mutual funds through their digital platforms.
As an NRI, you can invest in Indian mutual funds online or through an appointed Power of Attorney (PoA) in India. You can make a lump sum investment or contribute regularly through Systematic Investment Plans (SIPs). Your investment in Indian mutual funds will be subject to taxation in India, with tax rates being the same as for resident Indians. AMCs will deduct Tax Deducted at Source (TDS) on redemption or dividend payout.
Mutual funds are a popular investment option for NRIs as they offer flexibility, affordability, liquidity, and diversification. They are regulated to protect investors and provide peace of mind. Additionally, mutual funds are managed by expert fund managers who have access to information and statistics from leading economists and analysts worldwide.
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Investing in Indian companies as a non-Indian
India boasts a large population of STEM graduates who are fluent in English, and the country is already the world's fifth-largest economy. It is also the fastest-growing economy, with some experts predicting India will become the second-largest economy by 2075.
Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) can invest in the primary and secondary capital markets in India through the portfolio investment scheme (PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India. The ceiling for overall investment for FIIs is 24% of the paid-up capital of the Indian company and 10% for NRIs/PIOs. The limit is 20% for public sector banks.
Foreigners can purchase shares in individual Indian companies via the Indian Foreign Portfolio Investment scheme. The Nifty 50 is India's stock market index, representing the float-weighted average of 50 of the largest Indian companies listed on the Indian stock exchange. There are also broad-based indices in the Nifty 100 and Nifty 500, representing the top 100 and 500 Indian companies, respectively.
The simplest way to invest in Indian companies as a non-Indian is via globally-traded Indian stock ETFs like the Global X Nifty 50 ETF and BetaShares India Quality ETF. Exchange-traded funds are bought and sold like any other stock listed on the ASX, offering huge advantages to rank-and-file investors.
As an NRI, you can choose to invest in India on a repatriable or non-repatriable basis. You can repatriate the income earned through the investment or opt for non-repatriable investments, where the gains are retained in India. If you invest through an NRE account, the proceeds from investments are fully repatriable. However, if you invest from your NRO account, the proceeds are repatriable only up to USD 1 million per financial year, subject to necessary documentation and tax compliance.
A few things to keep in mind:
- India has an economy with exchange controls, meaning any transaction involving foreign investment into or out of the country is regulated.
- Foreign investment is permitted without prior approval from the Reserve Bank of India (RBI) in most industries, but certain sectors are prohibited (e.g. atomic energy, the lottery business, real estate, gambling, tobacco).
- Other sectors have restrictions, such as caps on investment amounts or local sourcing requirements.
- The Reserve Bank of India monitors the ceilings on FII/NRI/PIO investments in Indian companies daily.
- The default rule in India is that patents are owned by the employee/contractor unless validly assigned.
- Obtain tax advice early – several fundamental aspects of tax imposition in India change frequently.
- Investments into India traditionally involved routing the investment via Mauritius or other tax-efficient jurisdictions with double tax avoidance agreements.
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Frequently asked questions
You can invest in Australia as an Indian citizen by purchasing Australian stocks or exchange-traded funds (ETFs) that are listed on the Australian Stock Exchange (ASX). You can also consider investing in Australian companies directly or through a registered broker.
Australia offers a stable and developed economy, providing a relatively safe investment environment. The country has a strong regulatory framework and a diverse range of sectors, including minerals, energy, telecommunications, transport infrastructure, and information technology.
Yes, there may be restrictions on investing in certain sectors or industries due to regulatory requirements and foreign investment policies in both countries. It is important to research and understand these restrictions before making any investment decisions.
You can contact Australian banks that operate in India or their partner banks in India to guide you through the process of opening an Australian bank account. Each bank will have its own requirements and documentation needed for the process.
The tax implications can vary depending on the type of investment and the specific tax laws in both countries. It is important to consult with tax advisors in both India and Australia to understand the tax liabilities and any applicable double taxation agreements between the two countries.
