US Stocks: What Indian and NRI Investors Need to Know Before Going Global

The US stock market is the world’s largest and most liquid equity market. It is home to some of the most valuable and influential companies on the planet: Apple, Microsoft, Amazon, Nvidia, Alphabet, Tesla, and many more. For Indian investors, both NRIs and Indian residents, exposure to the US market has historically been one of the most rewarding international diversification decisions they could have made.

But investing in US stocks comes with its own set of considerations: how to access them, what taxes apply, what risks to understand, and which route is most efficient for your specific profile. This blog covers all of it.

Why Invest in US Stocks?

Scale and Depth of the Market: The US equity market represents approximately 40 to 45% of global market capitalisation. By not investing in the US market, an Indian investor is effectively ignoring nearly half of the world’s investable equity universe. The scale, liquidity, and depth of the US market are simply unmatched.

Access to Global Leaders: The dominant companies in technology, healthcare, consumer products, and financial services are overwhelmingly US-listed. Companies like Apple, Google, Nvidia, and Amazon do not just serve the US market; they are global businesses with revenue streams from across the world. Investing in them means participating in global economic growth, not just American growth.

Currency Diversification: As discussed in a previous blog, the long-term INR depreciation trend means that for Indian investors holding US dollar assets, the currency movement itself has historically added 3 to 4% per year to Rupee-denominated returns. This is a structural advantage that has compounded meaningfully over long investment horizons.

Sector Diversification: India’s stock market, while large and diverse, has a heavy concentration in banking, financial services, IT services, and energy. The Indian market has limited exposure to pure-play consumer internet, semiconductor, biotechnology, and defence technology companies. US markets provide access to all of these sectors at scale.

How Can Indian Residents Invest in US Stocks?

There are primarily two routes for Indian residents:

Route 1: Direct Purchase via LRS through GIFT City: This is the most regulated, transparent, and India-supervised route. Under the Liberalised Remittance Scheme, Indian residents can remit up to USD 250,000 per year to their GIFT City account and invest in US stocks, ETFs, and other international instruments through an IFSCA-regulated broker on NSE IFSC or India INX. Everything happens within an Indian regulatory framework.

Route 2: International Mutual Funds: Several mainland Indian AMCs offer funds that invest in US equities, including funds of funds that invest in international ETFs. These are accessible through regular mutual fund platforms in Rupees. However, SEBI has paused fresh investments in overseas funds at various points due to overall industry limits, so availability may vary.

How Can NRIs Invest in US Stocks?

For NRIs, the GIFT City route is generally the most efficient. You open a foreign currency account at GIFT City with an IFSCA-regulated broker, transfer your foreign currency earnings to the account, and invest directly in US stocks or global ETFs. There is no LRS limit for NRIs investing from their foreign currency accounts; the LRS framework applies specifically to Indian residents remitting from India.

NRIs can also directly open accounts with US-based brokers like Schwab International or Interactive Brokers, but this routes their investments outside the Indian regulatory framework, which some NRIs prefer to avoid.

Key Risks to Understand

Market Risk: The US stock market can be highly volatile. It has experienced significant corrections, including declines of 30 to 50% in bear markets. Long-term investors who stay invested through these cycles have historically recovered and done well, but the short-term volatility can be significant.

Concentration Risk: The US market, particularly the major indices like the S&P 500, is increasingly concentrated in a small number of very large technology companies. A significant decline in a handful of these companies can disproportionately affect index returns. Diversifying across sectors and geographies mitigates this.

Currency Risk (Both Ways): While INR depreciation has historically been a tailwind for Indian investors holding USD assets, there are periods of short-term Rupee appreciation. Investors with a short investment horizon may experience negative currency effects if they invest and exit within a short window where the Rupee has strengthened.

Regulatory and Geopolitical Risk: US regulatory changes, geopolitical events, and macroeconomic shifts can affect US market performance. These are external risks that Indian investors have limited visibility into and control over.

Tax Implications for Indian Investors in US Stocks

For Indian Residents: Gains from US stocks are taxable in India as per applicable capital gains rules. Long-term capital gains on listed international securities held for more than 24 months are taxed at 12.5% without indexation. Short-term gains are taxed at slab rates. Additionally, dividends from US stocks are subject to US withholding tax (typically 25% for Indian residents without a specific treaty provision), and this can be credited against Indian tax liability under DTAA.

For NRIs: Tax treatment for NRIs depends on their country of residence and the applicable DTAA with India. For NRIs based in countries with favourable DTAAs, such as the UAE (no personal income tax) or Singapore (low capital gains tax), the effective tax burden on US stock gains routed through GIFT City can be significantly lower. NRIs should consult a tax advisor to structure their US stock investments optimally.

How to Choose Between Individual US Stocks and ETFs

For most retail investors, particularly those new to US markets, starting with low-cost index ETFs that track broad indices like the S&P 500 or Nasdaq 100 is a sensible approach. These funds provide instant diversification across hundreds of US companies, have very low expense ratios, and have historically delivered strong long-term returns.

Individual stock picking in the US market requires comfort with US corporate research, quarterly earnings analysis, and sector-specific knowledge that most Indian investors, particularly those just getting started, may not yet have. As you build familiarity with the market, allocating a portion to individual stocks makes sense, but diversified ETFs as a core holding are a more robust starting point for most.

Getting Started

If you are ready to start investing in US stocks, the practical steps are straightforward:

• For Indian residents: Open a GIFT City account with an IFSCA-regulated broker, set up the LRS remittance with your Indian bank, and invest in US stocks or ETFs through the GIFT City platform
• For NRIs: Open a GIFT City account with an IFSCA-regulated broker, transfer your foreign currency to your GIFT City account, and invest in US stocks or ETFs
• In both cases: Start with broad-based index ETFs for core exposure, add individual stocks as you grow more comfortable with the US market

Bonanza IFSC provides regulated access to US equities and international ETFs through our GIFT City platform. Whether you are an NRI or an Indian resident, we can help you get started with global investing. Reach out to us at gift@bonanzaifsc.com or visit bonanzaifsc.com .