India’s economy is continuing to soar despite global recession and the political climate in India is also conducive for foreign individual investors and foreign institutional investors to invest in India.
The latest economic reforms put forth by Indian Government have made India one of the potential markets which fetch terrific return on investments through a common route. However, there are different provisions made by the Indian government for foreign investors and NRI investors. In “How to Invest in India - For NRI Investors” you found about investing options for Non- Resident Indians (NRIs). Now let’s get acquainted with the investing options, schemes and legalities an American would like to know while investing in India.
The perception of U.S. investors about India, one of the world’s largest and most rapidly growing economies, is changing. India's financial sector is indeed doing well. The stock markets are in a continued bullish state despite global recession. There are well-conceived and effective regulatory mechanisms in place. The government is according priority to infrastructural development. All these factors and more make India an ideal destination for foreign investors.
India’s newly elected government is expected to further speed up economic and India is well-set to open up its markets to more foreign investment. Foreign investors should seriously consider allotting a part of their investment portfolio into India as attractive gains are possible over the next few years
Mutual Funds Investing in India
Mutual funds are a safe bet for foreign investors - particularly for those who have no meaningful knowledge of the Indian markets. Mutual funds in India are managed by professionals who have expert knowledge of the stock markets. There are two types of mutual funds in India.
Open-end mutual funds, that carry no maturity date, can be bought and sold at prices linked to the unit’s net asset value. Closed-ended mutual funds carry fixed maturity dates, ranging from two to 15 years. Even if one fails to buy these units at initial offering, they can be subsequently bought from secondary markets. Recognize that interval options combine features of open and closed-end funds. Units of both types of mutual funds provide liquidity as they can be traded in the stock market.
Exchange Traded Fund (ETF)
The Exchange Traded Fund (ETF) is very well traded in the U.S. and has an array of some blue chip Indian stocks. Recently there was a tremendous short-term gain as the Indian ETF, within a space of a month, rose beyond 23%. Such types of incredible gains seldom occur but people who opted for this investment have become big beneficiaries.
Indian Stock Market
Investors belonging to foreign countries other than few neighboring countries are barred from investing through Indian Stock Exchanges in India. However some different routes are available to US nationals to invest in India. Two common ways are:
- ADRs (American Depository Receipts) issued in foreign markets by companies operating in India
- Mutual funds soared by institutional investors, domestic or foreign.
However, Foreign Institutions Investors (FII) can trade in Indian stock markets and invest almost in any Indian securities, subject to certain rules by Indian banks and other regulatory bodies. Many frontline Indian companies have issued ADR and GDR (Global Depository Receipts) in foreign stock markets and they are well traded in the US and European stock exchanges.