A Guide To Investing In Microsoft From India

Microsoft is a technology company that develops and licenses software and hardware products. It is one of the most popular tech companies in the world, with products like Windows and Office being used widely across the globe. The company has a market capitalization of $2 trillion and is listed on the Nasdaq stock exchange. If you are based in India and are interested in investing in Microsoft, there are several ways to do so. One way is to open an overseas trading account with a foreign broker who has a presence in India, or with a domestic broker who has partnerships with stockbrokers in the US. Another way is to invest in international mutual fund schemes or exchange-traded funds (ETFs) listed in India that offer exposure to Microsoft's stock. Additionally, you can buy direct US equities, including Microsoft shares, on the NSE International Exchange (NSE IFSC), a subsidiary of the National Stock Exchange of India.

Open an overseas trading account with a foreign broker

If you are an Indian resident, you can open an overseas trading account with a foreign broker that operates in India. Before opening such an account, make sure you are aware of all the associated costs.

To open an account, you will need to submit the necessary documents, such as your PAN and Aadhaar Card, and complete the KYC process. You can do this by availing of the online services offered by the brokerage firm.

Once your account is successfully opened, you can add funds to your account to purchase the stocks you wish to invest in. Note that regulations allow you to use the funds for derivative trading or speculation purposes.

When investing in the US equity market, it is important to strictly adhere to the rules and regulations of the Central Bank of India. As per RBI norms, Indian investors cannot remit more than $2.5 lakh in a financial year. Ensure that you complete the documentation for the Liberalised Remittance Scheme (LRS).

To buy shares of US companies from India, you need to transact in US dollars. Indian investors cannot purchase shares of these companies with Indian Rupees. You must buy US dollars from authorised currency exchange points in India.

When transferring Indian Rupees from your bank account in India to a trading account in the US, you must consider the exchange rate. Several international brokerage firms have collaborations with top nationalised banks to help Indian investors get favourable foreign exchange rates.

Indian investors have the option to buy fractional shares of US-based companies, in addition to buying in whole numbers. For example, you could buy 1.5 shares of Amazon or a single share.

US stocks offer dividends to shareholders, and a tax rate of 25% is applicable to such income. However, the dividend you receive in cash or choose to reinvest is taxed in India as per the income tax slab rate that is applicable. The tax retained in the US can be set off against the tax to be paid in India.

Open an overseas trading account with a domestic broker

To invest in Microsoft stocks from India, one option is to open an overseas trading account with a domestic broker who has a partnership with stockbrokers in the US. Many Indian brokerage firms have tie-ups with stockbroking companies in the US and act as intermediaries to execute trades.

There are a few things to keep in mind when considering this option. Firstly, there may be limitations in relation to the services offered by the domestic brokerage firm. For example, there could be restrictions on the number of buy or sell orders you can place. Secondly, the cost of investing through a domestic broker can be high, considering brokerage and currency conversion charges. Therefore, it is essential to understand all the associated costs before opening an account.

To open an overseas trading account with a domestic broker, you will need to submit a set of documents. The specific documents required may vary, but some standard documents include your PAN and Aadhaar Card. It is also important to ensure that you are aware of and compliant with the relevant Indian exchange control regulations and tax reporting requirements for overseas portfolio investment (OPI).

Overall, opening an overseas trading account with a domestic broker can be a convenient way for Indian residents to invest in Microsoft stocks, but it is important to carefully consider the limitations, costs, and regulatory requirements before proceeding.

Invest in international mutual fund schemes

If you are looking to invest in Microsoft from India, there are a few options available to you. One option is to open an overseas trading account with a foreign broker who has a presence in India, or with a domestic broker who has partnerships with stockbrokers in the US. You can then purchase Microsoft shares directly.

Another option is to invest in international mutual fund schemes, which offer exposure to foreign markets and provide an opportunity to invest in some of the biggest companies in the world, including Microsoft. These funds are also known as Foreign Mutual Funds or Overseas Funds. By investing in international mutual funds, you can benefit from geographic diversification, reducing the risk associated with investing only in the Indian market.

Understand the different types of international funds:

• International funds: Invest in securities around the world, except for the country in which the investor resides.
• Global funds: Invest in securities all around the world, including the country in which you reside.
• Regional funds: Focus on companies from a specific geographical region.
• Country funds: Invest in securities belonging to only one foreign country.
• Global sector funds: Focus on companies belonging to a specific sector in countries around the globe.

Consider the advantages of international funds:

• Geographic diversification: By investing in international funds, you can reduce the risk associated with investing solely in the Indian market.
• Cost-effectiveness: With the Indian markets reaching a high, international funds can provide a cost-effective alternative.
• Access to international markets: These funds allow you to gain exposure to foreign markets through qualified fund managers.

Be aware of the factors and risks:

• Currency risk: Changes in the value of the Indian rupee against other currencies can impact the returns on your investment.
• Macroeconomic factors: Political, economic, and social aspects of a country can influence the performance of international funds.

• Choose a fund that aligns with your investment goals and risk appetite.
• Conduct thorough research on the different international mutual fund schemes available in India, considering their past performance, fees, and investment strategies.
• Consult with a financial advisor or a qualified expert to ensure that you make an informed decision that suits your financial goals and risk tolerance.
• Once you have selected a fund, follow the fund house's or broker's process for investing, which may include registering online, providing KYC details, and making the investment.

By following these steps, you can invest in international mutual fund schemes, gaining exposure to foreign markets and companies such as Microsoft, while also diversifying your investment portfolio.

Trade on the NSE IFSC US Stock platform

The NSE IFSC (National Stock Exchange International Financial Service Centre) is a wholly-owned subsidiary of the National Stock Exchange (NSE) of India. The NSE IFSC exchange operates out of GIFT City (Gujarat International Finance Tech City) in Gandhinagar.

To trade on the NSE IFSC US Stock platform, you will need to open a trading and Demat account with an IFSC-registered broker. You can transfer money from your local bank account to the account of the IFSC-registered broker, and you are then ready to trade as soon as the funds appear in your broker's account.

• Open a trading account with a stockbroker registered with NSE IFSC. You can do this by availing of the online services offered by the brokerage firm.
• Complete the KYC (Know Your Customer) process by submitting the necessary documents, such as your PAN and Aadhaar Card.
• Once your account is successfully opened, add funds to your account to purchase the stocks you wish to invest in.
• You can now invest in US-based companies like Microsoft, but remember that this arrangement allows for fractional investing. This means you can have fractional ownership of any US stock.

Some key things to keep in mind:

• You will be issued depository receipts, which are financial instruments that represent an equity stock listed on a foreign exchange.
• NSE IFSC transaction fees are currently charged at 12 cents for every US$100 of stocks traded, or 0.12% of the transaction value.
• Currency conversion charges will apply since transactions are conducted in US dollars.
• There is a limit to how much you can invest under the Liberalised Remittance Scheme (LRS). As per LRS rules, you are allowed to invest a maximum of US$2.5 lakh during a financial year.

Invest in mutual funds with global exposure

If you want to invest in Microsoft stocks without opening a foreign trading account, you can gain exposure by investing in mutual funds with global exposure. Mutual funds are a great way to diversify your portfolio and reduce risk, as they allow you to invest in some of the biggest global companies across different sectors and markets.

• Understand your financial goals and risk tolerance: Determine your financial objectives, such as long-term growth or income generation, and assess your risk tolerance.
• Evaluate the fund's investment strategy and stock composition: Analyze the fund's investment approach, the sectors or markets it focuses on, and the types of stocks it holds. Ensure that the fund's strategy aligns with your financial goals and risk profile.
• Consider the fund's performance and track record: Review the fund's historical performance over different time periods and compare it against relevant benchmarks. Remember, past performance does not guarantee future results.
• Analyze the fund's management team and investment process: Evaluate the expertise and track record of the fund managers, as well as the investment process they follow. A well-established and focused investment strategy can contribute to consistent performance.
• Review the fund's costs and fees: Compare the expense ratios and other fees associated with the fund, as these can significantly impact your overall returns over the long term. Lower fees provide a better opportunity for higher net gains.
• Assess the fund's risk profile: Evaluate the fund's volatility, diversification strategies, and risk management techniques to ensure the level of risk aligns with your financial goals and risk tolerance.
• Consider the fund's accessibility and ease of investment: Ensure that the fund is readily available to Indian investors and that you can invest and redeem units without significant challenges or restrictions.
• Parag Parikh Long Term Equity Fund: This fund invests in Indian and foreign stocks, offering exposure to companies with strong growth potential worldwide. Its diverse portfolio and long-term investment strategies make it an attractive option for Indian investors.
• Franklin India Feeder - Franklin U.S. Opportunities Fund: This fund provides Indian investors with access to high-quality U.S. companies across various sectors, allowing them to benefit from growth opportunities in the world's largest economy.
• ICICI Prudential U.S. Bluechip Equity Fund: This fund focuses on investing in large-cap U.S. companies with a track record of consistent performance and solid fundamentals. It offers Indian investors a way to gain exposure to the stability and growth prospects of the U.S. market.
• Edelweiss U.S. Technology Equity Fund of Fund: As the name suggests, this fund invests in U.S. technology companies, providing Indian investors with exposure to the innovative and rapidly growing tech sector in the United States.
• Motilal Oswal Nasdaq 100 Fund of Fund: This fund tracks the performance of the Nasdaq 100 Index, which comprises the 100 largest non-financial companies listed on the Nasdaq Stock Market. It offers Indian investors a convenient way to invest in leading U.S. technology and growth companies.

By following these steps and considering the mentioned funds, you can make informed decisions about investing in mutual funds with global exposure, allowing you to gain exposure to companies like Microsoft while diversifying your portfolio and potentially improving your overall investment returns.

Frequently asked questions