There are markets abroad where you can invest and reap the benefits of other countries’ growth and policies.Technology is aiding investors like never before. Today, you can get the information about any company, fund, or any other investment assets on your computer immediately. SEBI has allowed Indian investors to trade in 24 global indices’ derivatives across the world.
Why to invest?
- Investors can diversify in global market to mitigate home risk.
- Trading can be done in Indian time and INR and hence investors do not have to worry about conversion and timing.
- Trading in global derivatives will be as simple as trading in Nifty or Sensex.
Who can invest?
You must be an Indian resident (of course others can also do it based on their countries’ policies). You must have an overseas account. These can be opened quite easily with any Indian brokers such as ICICI bank.
What can you trade in?
You can trade in any SEBI approved indices listed in foreign stock exchanges. The criteria to select these indices are that these indices should have a market cap of $100b or more. These indices must have at least 10 stocks in their basket with no stock contributing more than 25% of the market cap.
How should I start?
You have to start an overseas account with any of the brokers like ICICI direct. Submit your address proof, identity proof, and PAN card and you are all set.
Important points to keep in mind
While trading in global market offers lot of benefits, there are few important points investors must keep in mind.
First, derivatives are highly risky investment. While the potential of profit is humongous, the possibility of loss is also huge. Keep in mind that derivatives are risky.
Second, foreign markets are foreign market. Hence there will always be information delays despite investors having access to all gadgets. Investors may find themselves unable to estimate and understand the impact of specific information on their investment.
Finally, trade in Indian derivatives before you invest in global indices. This will give you some idea about the price/volume trends and factors that impact demand supply structure.
In our next part, we will see some of the mutual funds in India by Indian mutual fund companies that invest in global markets. Buying such mutual fund is easier because you can use your existing demat account and do not need to open overseas account.