Yes, NRI can invest in the stock market as well as in mutual funds in India, provided they have an NRE saving account in India. Investing in a Mutual fund is easier than directly investing in Stocks because you don't need a Demat account to invest in the Mutual fund and also there are a lot of restriction applicable to NRI directly investing in Stocks. So if you don't want to go through the hassle of opening a Demat account and a Portfolio Investment account, required by RBI to keep track of NRI investment on the stock market, it's better to invest in Mutual funds and exchange traded funds.
Nowadays you can buy Mutual funds units directly from your NRI account, for example, HDFC NRE account allows you to buy mutual funds directly from their Netbanking interface.
All NRIs who wish to invest in the stock market must have PINS account and all transactions must be routed through their dedicated PINS account. You should inform your bank about your NRI status so that he can change the DMAT account accordingly.
The RBI required all transaction through a dedicated PINS account because there is a predefined threshold for NRI investment in the stock of any company, for example, an NRI cannot hold more than 10% shares in any company.
Apart from an NRE account, a DMAT account and a PINS account here are some other restrictions on NRI investment on Indian Stock Market.
1) As opposed to residents, non-residents Indians cannot do day trading. Which means they must take delivery of stocks i.e. if you buy a stock today, you can only sell it after two days once the settlement of the previous transaction has happened and stock is credited into your DMAT account.
2) An NRI cannot hold more than 10% of total holding in India listed company. (20% in case of public sector banks e.g. SBI)
3) Only one PINS account is allowed to NRI. You cannot hold more than one PINS account.
4) NRIs must inform their bank and broker about any change in their status and update KYC immediately.
So in short, NRI can invest in Indian stock market and buy mutual funds but there is a little bit of hassle on directly investing in stocks, but buying a mutual fund is very easy because all you need is an NRE saving account. By using that account you can open NRE fixed deposit as well as you can buy units of Mutual funds.
For US-based NRI, there is a restriction on buying mutual fund units from US-based fund house, imposed by SEC. So it's better you invest via an Indian fund house like ICICI, HDFC or SBI, you also need to complete FATCA requirements.
Nowadays you can buy Mutual funds units directly from your NRI account, for example, HDFC NRE account allows you to buy mutual funds directly from their Netbanking interface.
Can NRIs use their resident DMAT account to invest in Stocks?
One of the common doubt among Non Resident Indian is that whether they can use their existing DMAT account for investing in Stock Market or not? The answer is No, you cannot use your existing resident DMAT account for investing in stocks, this is against the RBI guidelines.All NRIs who wish to invest in the stock market must have PINS account and all transactions must be routed through their dedicated PINS account. You should inform your bank about your NRI status so that he can change the DMAT account accordingly.
The RBI required all transaction through a dedicated PINS account because there is a predefined threshold for NRI investment in the stock of any company, for example, an NRI cannot hold more than 10% shares in any company.
Restrictions for NRI investing in Stock Market
1) As opposed to residents, non-residents Indians cannot do day trading. Which means they must take delivery of stocks i.e. if you buy a stock today, you can only sell it after two days once the settlement of the previous transaction has happened and stock is credited into your DMAT account.
2) An NRI cannot hold more than 10% of total holding in India listed company. (20% in case of public sector banks e.g. SBI)
3) Only one PINS account is allowed to NRI. You cannot hold more than one PINS account.
4) NRIs must inform their bank and broker about any change in their status and update KYC immediately.
So in short, NRI can invest in Indian stock market and buy mutual funds but there is a little bit of hassle on directly investing in stocks, but buying a mutual fund is very easy because all you need is an NRE saving account. By using that account you can open NRE fixed deposit as well as you can buy units of Mutual funds.For US-based NRI, there is a restriction on buying mutual fund units from US-based fund house, imposed by SEC. So it's better you invest via an Indian fund house like ICICI, HDFC or SBI, you also need to complete FATCA requirements.
I have my NRE account with Standard Charted bank, your blog says "For US-based NRI, there is a restriction on buying mutual fund units from US-based fund house, imposed by SEC. So it's better you invest via an Indian fund house e.g. ICICI, HDFC or SBI, you also need to complete FATCA requirements". Can you please explain more on this
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