NSE IFSC Benefits and Features for Global Investors and NRIs

Introduction

Foreign nationals and NRIs often struggle to participate in the Indian stock market.  Obstacles like lengthy paperwork, offline documentation and navigating technicalities (such as understanding PIS and Non-PIS accounts) makes the process of investing in the Indian stock market cumbersome.

All hope is not lost, however, because now NRIs and foreign nationals can be part of the Indian markets through NSE’s subsidiary in GIFT City. NSE Gift City offers trading products like GIFT Nifty derivative contracts, and US stocks through NSE-IX receipts. There are other products like IPO, listing of Indian stocks etc. under way. Though designed for cross-border transactions, it also has offerings for resident Indians under the LRS (Limited Remittance Scheme).

In this blog, we will be taking a closer look at NSE Gift City, its product offerings, and how foreigners, residents, and NRIs can invest in its products.  

What is NSE IFSC?

NSE IFSC is a stock exchange launched as a global trading platform in the International Financial Services Centre (IFSC) within GIFT City. It is a wholly-owned National Stock Exchange (NSE) subsidiary overseen by IFSCA (International Financial Services Centre Authority). It was launched in 2017 to allow international investors to access trading in index derivatives, stock derivatives, currency and commodity derivatives, and debt securities.

Having extended trading time of 21 hours, it offers international traders extended trading hours to access the market. In 2022, it launched the unsponsored depository receipts that track the US markets. This is available for both Indian investors (within the limit of Liberalised Remittance Scheme) and international investors.

Key Features and Benefits of NSE in GIFT City

Products Offered

• Equity Index Derivatives: It offers the futures and options contract for tracking the indices such as Nifty, Bank Nifty, Nifty Financial Services, Nifty IT, Nifty Next 50 and Nifty Midcap Select. The futures and options contracts are denominated in USD. You can read more about GIFT Nifty here. 

• Single Stock Equity Derivatives: Derivatives of 209 stocks listed in the NSE denominated in USD are available for trading in NSE IX. 

• Currency Derivatives: Derivatives of 7 currency pairs are available to trade. 

• Debt Based Derivatives : Offers trading in 34 debt based derivatives. 

• Provides Access to Global Stocks via Unsponsored Depository Receipts: Investors can trade in Unsponsored Depository Receipts (UDRs) which have US Stocks underlying them. The custodian for these UDRs is HDFC Bank’s IFSC branch. The UDRs involve exposure to the stock’s financial performance and certain benefits associated with owning the stock (such as possible dividends) without the voting rights. Currently there are 50 stocks available with plans of expansion to 100 other stocks and ETFs. ).

Trading Hours Aligned with US Timings

Trading hours on the NSE IFSC exchange will reflect that of the New York Stock Exchange (NYSE) and so will commence from 8 PM (IST) to 2:30 PM (IST) the following day. These trading hours overlap with the London and Dubai Markets, which helps investors react to news developments over a longer period.

All Trading Activities Are Conducting Using USD: Keeping with the original purpose of establishing GIFT City (which is to attract and facilitate cross-border investments), all trade options are available in USD. This is done to eliminate the drawback of traditional means of investing in US stocks (such as international brokers) that involve a fixed cost to be paid for money transfers, on top of losing gains on the currency spread.

Protected by IFSCA regulations

The International Financial Services Centre Authority (IFSCA) acts as a unified regulator for all financial activities conducted by entities (like NSE IFSC) in GIFT City. NSE IFSC is internationally recognised as a registered stock exchange coming under IFSCA’s purview, and it ensures that exchanges like NSE IFSC follow and adhere to international standards & best practices.

Tax Incentives

To promote investments and trade volumes within GIFT City, investors in IFSCs like NSE GIFT City enjoy a slew of tax incentives they otherwise would not when pursuing investments in the domestic market. 

Tax Benefits for NSE GIFT City Investors

Since NSE IFSC operates within GIFT City, its tax benefits generally overlap with the broader GIFT City IFSC incentives. Some of these benefits include eliminating Securities Transaction Tax (STT), Commodities Transaction Tax (CTT), or Stamp Duty on trades. This helps reduce overall transaction costs compared to domestic NSE trading. There is a lower withholding tax of 9% on holding debt securities.

Investment Opportunities in NSE IFSC

For investments, NSE Gift City offers an easy way to trade popular US stocks like Apple, Amazon, and Tesla via unsponsored depository receipts representing shares of these companies. For trading,  provides access to derivatives like the popular NSE Indices like Nifty, Bank Nifty etc. that track the underlying Indian indices and are traded in USD and offer extended trading hours to align with global markets. Find below an exhaustive list of financial products offered in GIFT City:

Risks Associated with NSE GIFT City Investments

Investing in the NSE IFSC platform, while providing a unique opportunity for Indian retail investors, carries certain risks that every investor must be aware of before engaging in any trading activities:

• General Price & Volatility Risk: Unexpected developments within the market and global interest rate changes can cause volatility in the underlying stock price, which can reduce the value of our NSE IFSC receipts.

• Risk of liquidity: Since NSE IFSC products are relatively new, they require larger trading volumes to sell at desirable rates quickly, making exit positions difficult.

How to Trade on NSE IFSC in GIFT City

To start trading on NSE IFSC, you must first meet the eligibility criteria set by IFSCA and NSE IFSC Limited. This eligibility criteria maintains that the trading member must meet any of the following requirements:

• Non-Resident Indians (NRI)

• Individual Resident in India eligible under FEMA to invest funds offshore to the extent RBI allows under the Liberalised Remittance Scheme (LRS) - Can only buy and hold US Stocks.

Note: If you qualify as an NRI or a foreign national, you are automatically eligible to trade in all products available in GIFT City.

Once you meet the above requirements, the next step is to open your trading and demat account with an NSE IFSC registered broker. Currently, there are 37 registered brokers; some names are provided below for ease of reference:

• Edelweiss Securities (IFSC) Limited

• Mansukh IFSC Broking Private Limited

• Divya Portfolio (IFSC) Private Limited

• Goldmine IFSC Private Limited

• SIHL Global Investments (IFSC) Private Limited

• Arya Fin-trade (IFSC) Private Limited

• Findoc Investmart (IFSC) Private Limited

• HDFC Bank Limited- Ifsc Banking Unit (IBU)

• SMC Global IFSC Private Limited

The full list of brokers is available here. 

For resident Indians, you must complete documentation related to the Liberalized Remittance Scheme (LRS) with the bank. 

Once these formalities are completed, it is time to transfer your US-denominated funds to the trading member’s bank account in GIFT IBU (International Banking Unit).

After receiving confirmation for the transfer of funds from the broker, you can now start trading NSE IFSC receipts on the NSE IFSC platform. 

For NRIs, the process of opening a brokerage account is a little more complex. It needs physical verification of the documents in the person’s country of residence and physical signatures. Once these procedures are completed, the person can start trading/ investing in NSE GIFT City. 

Why Choose NSE GIFT City for Investments?

Gift City is a game-changer for NRIs looking to enter the Indian financial market. Built for streamlined trading activities using global standards, it offers many benefits compared to similar financial markets that make it stand out.

For instance, NSE GIFT City is designated as a Special Economic Zone (SEZ) by the Indian Government. As such, it offers many tax benefits, including exemptions from STT, CTT and Long-term Capital gains tax. Further, it provides additional incentives for investors through reduced operational costs and access to high-growth sectors like manufacturing & technology.

There are complex regulations and paperwork involved for NRIs to trade directly in the Indian stock market. NSE IX makes this process easier through tracking the important indices of the Indian stock market, not involving the complications of PIS and Non-PIS scheme, extended hours of trading and denomination in USD.

Conclusion

NSE Gift City is backed by a strong, unified regulatory authority in IFSCA. It provides easy access to top-listed US stocks, a wide range of derivatives & securities, and special tax incentives (owing to its SEZ status). Thus, it’s hard to see why a potential investor looking to maximise his/her gains by entering the global market should look anywhere other than NSE Gift City.

Being specifically designed to stay competitive within the global financial market, NSE Gift City offers extended trade timings that mirror the US market. It provides USD-denominated trade activities to fight against potential losses from international remittances. It even offers an internationally recognised trading platform that matches global standards.

However, since GIFT City is relatively new within the global market, investors must take appropriate caution in combating risk factors such as liquidity, general volatility, and rebalancing costs to benefit from their investments.