Arnav Singh asked on 31/03/2020

Are there any restrictions for NRIs to invest in the share market in India?

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SBNRI Team
answered on 31/03/2020

There are certain restrictions for NRIs while investing in the share market in India, which are:

  • An NRI cannot transact in India except through a stock broker or third parties like Zerodha
  • NRIs cannot trade shares in India on a non-delivery basis*, that is, they can neither do day-trading nor short-sell in India. If they buy a stock today, they can only sell it after two days.
  • NRIs must carry out all the purchase/sale from one designated bank branch only
  • There are certain ceilings NRIs are bound to:
    • 5% of the paid-up value of shares of an Indian Company each for repatriable and non-repatriable basis which means that the maximum ceiling per Indian Company for all NRIs will be 10%, which can be increased to 24% if the company passes a resolution for the same

Basic term definitions:

  • Non-Delivery Basis: Delivery means you buy the stock but “hold” it overnight. In the cash segment, you have to wait for two business days after the transaction to receive the actual delivery. Eg: If you bought on Tuesday, then you get the delivery on Thursday after closing. Non-delivery means you sell on the same day when you buy (Also called “day trading“). Eg: You buy a stock on Tuesday and sell it on Tuesday.
  • Short-Selling: Short selling is a method of borrowing stocks and selling them in the open market and then re-buying the same stocks at a lower price. The strategy here is to benefit from the falling prices of the stocks.

 

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