Most encountered question by foreigners – Can a Foreigner Invest in Indian Stock Market? We answered here. As compared to the major superpowers of the world, India seems to be a small little country that does not have much to offer. Not everyone knows the true power and essence that India has to offer. If anyone looks closely into India they will discover that the Indian stock market is an emerging market that has a lot to offer to the world.The Indian stock market itself is divided into two within the subcontinent. The Bombay Stock Exchange (BSE) is the oldest of the two stock markets that are within the country. This stock exchange was founded in the year 1857 while the National Stock Exchange (NSE) was founded between the years 1992 and 1994. The number of firms that are associated with the BSE are far more as compared to the newly-established NSE.
What is the Purpose of a Stock Market Exchange?
Stock markets are the reflection of the revenue that a country makes on a daily basis. Though the stock market runs on behalf of the country, the prime reason for the existence of the stock market is to help companies around the world raise money. For companies to raise money through stocks they must sell their private ownership of the company to the public in the form of stocks. These stocks are the firm’s capital formation. Stocks keep increasing or decreasing over time depending on the number of stocks that they have in the market and the value of those stocks.
Other functions of the stock market include regulated trading of stocks for investment purposes. Stocks are exchanged on a global basis and anyone around the world can buy or sell their stocks to other people across the globe. Since stocks come with all information relating to them, investors find it easier to understand which stock to buy and how they should invest in it.
How to Invest in the Indians Stock Market
The Indian stock market is of great advantage to the companies as the stock market returns more than it gets to the companies that have invested in it. In the previous year, the companies which invested in the stock market got back 30% more of what they had invested throughout the year. For those who are set on making an investment in India there are certain rules that they should keep in mind.
- There are a number of companies that are invested in the stock market and it is essential to choose a good company to invest it. Buyers should not go with the common mentality and thinking that all investors have and instead choose the company that best suits them. Choosing a company is the most important part about investing in the stock exchange market of India.
- Investors should always understand the business that they are investing in. The stock market changes rapidly which will force investors to make rapid decisions of the stocks that they hold. All investors should make informed and well thought of decisions.
- Investors of the stock market should only invest their excess funds into the market. No emotions should take part while investing as rash decisions are made under the influence of emotions.
- Those who are investing in the stock market should have extremely realistic goals of what the market will give them back in return. Investors should also always be informed about the way that the stock market is and how it is progressing on a day-to-day basis.
Foreigners Investing on the Indian Stock Market
Before, India had a policy that only qualified Indian personnel could invest in the mutual schemes section of the stock market. This policy was lifted in the year 2012 where a new law was passed stating that all qualified foreign individuals can now invest directly into the Indian stock market. This new rule was introduced to further deepen the Indian capital market. Though Qualified Foreign Investors are allowed to invest in the Indian stock market, they do not have direct access to the Indian equity market.
For those who are abroad and want to invest in the Indian stock market there are some rules that they need to follow to accomplish the task. Foreigners who want to invest in India are subjected to the Foreign Exchange Management Act (FEMA) and the Foreign Direct Investment Policy.
About the Securities and Exchange Board of India
The securities and exchange board of India (SEBI) is in charge of for regulating the security of the Indian market. The governing body was established in the year 1988 but was given full power through the SEBI Act of 1922. SEBI is established for maintaining discipline among the Indian stock market. This includes maintaining the security for investors, the companies that have sold their stocks in the market and many more.
Some of the powers that are possessed by SEBI include:
- Inspecting through the books of accounting and periodic calls from recognized security exchanges
- To compel certain companies to list in their shares for one or more security exchanges
- Register brokers and non brokers
- Inspecting the book of accounts and periodicals of financial intermediaries
- To approve any and all by-law securities exchange
Why Invest in the Indian Stock Market?Can a Foreigner Invest in Indian Stock Market?
The Indian stock market is an opportunity for anyone to make profit off of other companies through the buying and selling of shares and seeing how the shares pan out. Though many may not know about the vast possibilities of the Indian stock market, it is making a name for itself on the worldwide basis. According to statistics, the Indian stock market is making investors profit up to 30% more than their investment on a yearly basis. However, the way the Indian market pays off an investor is all dependent on the investor himself/herself.
Investors who want to profit off of the Indian stock market should have a good ideal of what they are investing into and the outcome for their investment. Investors should also take note of the amount of money they are adding into the investment and keep a check on the regular outcome of the stocks.
Only those investors who have strategically invested their money in stocks at the right time are constantly aware of where their money is flowing are able to make immense amounts of profit off of the stock market.