Brokerages to tap into clients’ appetite for overseas trading
At least 3 firms likely to give investors the option, starting with US stocks
An increasing number of brokerage firms are likely to offer clients the option to trade on stock exchanges of other countries.
At least three major brokerages are looking to make such offerings available to their clients, according to officials Business Standard spoke to.
They include Angel Broking, Geojit Financial Services, and Samco Securities. A number of launches are focusing on trading in shares in the US.
Vinay Agrawal, chief executive officer of Angel Broking, said clients will likely be able to trade overseas shortly. “...we would be launching very soon... we are starting with US markets,” he said.
“We are also in the process of rolling out such a platform,” said Jimeet Modi, chief executive officer at Samco Securities. He added that it is likely to be a niche product because remitting money abroad is often not as simple as deploying it domestically. Bank charges can often be high if very small amounts are involved, which can make it less attractive for those who trade smaller amounts in domestic markets, he said.
Satish Menon, executive director at Geojit Financial Services, echoed the view, adding that it is a good product for those who want diversification. “We are exploring options for a select set of clients,” he said. Bank-backed brokerages had made such offerings available. The brokerage arm of ICICI Bank, ICICI Securities, had announced a similar launch in August. It had tied up with Interactive Brokers, which is based in the US. Axis Bank’s retail broking and investment services firm Axis Securities also announced a similar venture last month by tying up with online platform Vested Finance.
The Reserve Bank of India (RBI) allows residents to send up to $250,000 a year abroad under its Liberalised Remittance Scheme (LRS). An analysis of past data shows increasing equity and debt investments abroad.
Residents had invested $165.5 million in 2013-14. This increased by over 160 per cent to $431.4 million in 2019-20, outstripping the growth in immovable property. The latter had grown around 47 per cent over that period. It was $58.7 million in 2013-14, and rose to $86.4 million in FY20.
Among the offerings is also an avenue for fractional investing, which means they can execute an order for part of a share. This means that if a share costs $500, you may be able to purchase a tenth of it by paying $50.
The drive to offer new products comes as an increasing number of people are opening trading accounts in India. Besides, the commissions brokers charge has fallen over the years, even as they saw a significant rise in activity as more people stayed at home during the nationwide lockdown.
Added to this is the fact that the stock markets crashed in March, only to bounce back. The benchmark S&P BSE Sensex fell to a low of 25,638.9 on March 24, but has since risen 52.1 per cent to close at 38,990.94 on Thursday. This means that a person who invested in March would have made 50 per cent or more in just a few months.