Lyla Lindsey
As the world's fastest-growing economy, investing in the Indian stock market is an attractive prospect for many Australians. There are several ways to do this, including via ETFs (exchange-traded funds) that track the performance of Indian stocks or indices like the Nifty 50 or MSCI India Index. Non-Resident Indians (NRIs) can also invest directly in Indian stocks, although this requires careful consideration of fees and share types.
| Characteristics | Values |
|---|---|
| Major Australian ETFs | IIND ETF, NDIA ETF, FIIN ETF |
| IIND ETF management fee | 0.80% p.a. |
| NDIA ETF management fee | 0.69% p.a. |
| FIIN ETF management fee | 0.69% p.a. |
| FIIN ETF year-to-date performance | -3.71% (since 28 May 2024) |
| Nifty 50 ETFs | ICICI Prudential Nifty 50 ETF, HDFC Nifty 50 ETF, Nippon India ETF Nifty 50 BeES |
| MSCI India Index constituents | 146 |
| MSCI India Index representation of Indian equities market | ~85% |
| MSCI index investment | iShares MSCI India ETF (BATS: INDA) |
| Investment option for non-Indian citizens | Globally-traded Indian stock ETFs like the Global X Nifty 50 ETF and BetaShares India Quality ETF |
| Banks providing overseas/online experience | YES Bank, HDFC, Zheroda, Axis Bank |
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What You'll Learn
ETFs that track the performance of the Indian stock market
Exchange-traded funds, or ETFs, are a popular way to invest in the Indian stock market from Australia. ETFs are a type of investment fund that holds a collection of securities, such as stocks, bonds, and commodities, and trades on an exchange like a stock. They are designed to track a particular market index or sector, and their value is derived from the performance of the underlying securities.
There are several ETFs available in Australia that specifically track the performance of the Indian stock market. Here are some of the most prominent ones:
IShares MSCI India ETF (INDA): This ETF seeks to track the investment results of an index composed of Indian equities. It is traded on the BATS Global Markets exchange and is designed to provide targeted access to Indian stocks and the growth of India's developing economy.
Global X Nifty 50 ETF: This ETF tracks the Nifty 50 index, which includes 50 of the largest companies on the Indian stock market. It provides exposure to some of the leading companies in India, such as ICICI Bank and HDFC Bank.
BetaShares India Quality ETF: This ETF offered by BetaShares focuses on quality Indian companies with strong fundamentals and growth potential. It includes a mix of financial services, consumer, and information technology companies, such as Infosys and Tata Consultancy Services.
WisdomTree India Hedged Equity Index ETF: This actively managed ETF seeks to track the price and yield performance of the WisdomTree India Hedged Equity Index. It is advised by Global X Management and aims to achieve long-term capital growth.
When investing in ETFs, it is important to consider factors such as management fees, brokerage commissions, and the overall risk profile of the fund. It is always recommended to do your own research or consult with a financial advisor before making any investment decisions.
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Globally-traded ETFs that track the Nifty 50 index
The Nifty 50 is a benchmark stock market index that tracks the performance of 50 of the largest companies on the National Stock Exchange (NSE) of India by weighted average. It is owned and managed by NSE Indices and was founded in 1996. There are a number of Nifty 50 ETFs that trade on the NSE in India, including the ICICI Prudential Nifty 50 ETF, HDFC Nifty 50 ETF, and the Nippon India ETF Nifty 50 BeES.
For those looking to invest in the Nifty 50 from Australia, there are several globally-traded ETFs that track the performance of the Nifty 50 index, including:
- The MSCI India Index, which tracks the performance of large and mid-cap companies on the NSE. It currently includes 146 constituents, representing around 85% of the total Indian equities market.
- The Global X Nifty 50 ETF, which is a globally-traded Indian stock ETF that tracks the performance of the Nifty 50 index.
- The BetaShares India Quality ETF, which is another globally-traded Indian stock ETF that tracks the performance of the Nifty 50 index.
- The NDIA ETF, which tracks the performance of the 50 largest companies on the Indian stock market that make up the Nifty 50 index. This ETF has a management fee of 0.69% p.a.
Nifty 50 ETFs offer diversification by investing in India's top 50 companies across multiple industries, reflecting the country's economic performance and providing stability. These ETFs have low expense ratios, high liquidity, and passive management, which reduces costs for investors. However, they carry market risk, and sectoral bias exists due to the dominance of banking and IT stocks.
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Investing in Indian companies as a non-Indian
As a non-Indian, there are a few ways to invest in Indian companies. One way is via globally-traded Indian stock ETFs (exchange-traded funds) like the Global X Nifty 50 ETF and BetaShares India Quality ETF. These ETFs track the performance of the Indian stock market or specific indices like the Nifty 50, which follows the 50 largest companies on the Indian stock market.
Another option is to invest through Foreign Institutional Investors (FIIs) or Portfolio Investment Schemes (PIS). FIIs are allowed to invest in Indian companies through the PIS, and there are limits on the amount they can invest, which is monitored by the Reserve Bank of India. The overall investment ceiling for FIIs is 24% of the paid-up capital of an Indian company, and 10% for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs).
It's important to be aware of the unique characteristics of the Indian economic and legal regime. India has exchange controls, so any transaction involving foreign investment is regulated. While foreign investment is permitted without prior approval from the RBI in most industries, certain sectors are prohibited or restricted, such as atomic energy, the lottery business, real estate, gambling, tobacco, insurance, financial services, and print media. Obtaining tax advice early is recommended as fundamental aspects of tax imposition in India change frequently. Additionally, be mindful of the "Indirect Transfer Tax", which may apply when transferring shares in a foreign holding company that holds stakes in an Indian company.
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The Nifty 50 benchmark stock market index
The Nifty 50 is a benchmark stock market index that tracks the performance of the top 50 largest companies on the National Stock Exchange of India (NSE) by weighted average. It was founded in 1996 and is owned and managed by NSE Indices.
The Nifty 50 index includes companies from 13 sectors of the Indian economy, such as financial services, consumer goods, and information technology. The list of the Nifty 50 constituents is rescheduled every 6 months. Some of the top companies on the Nifty 50 index include Reliance, HDFC Bank, and TCS.
As an Australian investor, you can gain exposure to the Nifty 50 index through Exchange-Traded Funds (ETFs) that track its performance. These ETFs include the ICICI Prudential Nifty 50 ETF, HDFC Nifty 50 ETF, Nippon India ETF Nifty 50 BeES, and Global X Nifty 50 ETF. These ETFs provide a diversified way to invest in the Indian stock market and gain exposure to the top companies in the country.
Additionally, the NDIA ETF is another option for Australian investors to track the performance of the Nifty 50 index. This ETF has a management fee of 0.69% per annum and focuses on the 50 largest companies that make up the index.
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Investing in Indian mutual funds
As a non-resident Indian (NRI), you can invest in Indian mutual funds, allowing you to benefit from the growth of the Indian economy. However, there are some rules and tax implications to be aware of before investing.
Firstly, you must be classified as an NRI under the Foreign Exchange Management Act (FEMA) guidelines. You will need to update your residency status and complete Know Your Customer (KYC) compliance, which involves submitting a copy of your passport, date of birth, photo, address, and current residential proof. Some fund houses may also require in-person verification.
Secondly, you must invest through a rupee-denominated account, specifically an active Non-Residential External (NRE) or Non-Residential Ordinary (NRO) bank account in India. If you had existing mutual fund Systematic Investment Plans (SIPs) as a resident Indian, you can continue with them but must update your NRO account details with your Asset Management Company (AMC) or broker.
It is important to note that income earned from mutual fund investments by NRIs is subject to taxation in India at the same rate as resident Indians. AMCs will deduct Tax Deducted at Source (TDS) on redemption/dividend payout, and you should consult a tax expert to determine your exact tax liability.
Certain AMCs will have restrictions on investments by NRIs based on their country of residence. The compliance requirements in the USA and Canada are more stringent due to the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS), and some fund houses do not allow NRIs from these countries to invest in their schemes.
Overall, investing in Indian mutual funds as an NRI offers advantages such as flexibility, affordability, liquidity, and professional management, but it is important to carefully consider the initial hassles, tax implications, and potential restrictions before investing.
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Frequently asked questions
The three major Australian ETFs that track the performance of the Indian stock market are:
- IIND ETF, which focuses on top Indian companies in financial services, consumer, and IT sectors.
- NDIA ETF, which tracks the performance of the Nifty 50 index.
- FIIN ETF, which focuses on 40-60 diversified Indian stocks with scalable business models.
The management fees for these ETFs are 0.80% p.a. for IIND, 0.69% p.a. for NDIA, and 0.69% p.a. for FIIN.
NRIs can invest directly in Indian stocks by using globally-traded Indian stock ETFs like the Global X Nifty 50 ETF and BetaShares India Quality ETF.
