Stocks surge as Donald Trump returns! How to invest in US stocks from India - Step-by-step guide

US election 2024: As the US election results near finalisation, it appears former President Donald Trump is on track for a political comeback. With victories in more than 30 states, including key battlegrounds like Pennsylvania, Georgia, Texas, and Florida, Trump is edging closer to reclaiming the presidency. Meanwhile, Democratic candidate Kamala Harris has secured 20 states so far, as counting continues in the remaining areas.

Trump’s current standing shows him with 267 electoral votes, just one state away from the 270 needed to win. His strong showing in swing states, especially Pennsylvania, has boosted his chances, making him the clear front-runner to become the 47th President of the United States.

How is the US market reacting?

The stock market is reacting swiftly to the election developments, with the Dow Jones futures up 2.63% and a 1100 point increase at the time of writing this report. This surge reflects investor confidence, as many expect Trump’s policies, particularly those favouring business and lower taxes, to boost a more favourable economic environment.

Analysts anticipate further market gains as the final electoral results unfold. Tesla stocks are expected to remain in focus. Elon Musk ’s consistent support for Trump and his efforts to amplify the former president's campaign through social media have put the electric vehicle giant at the centre of attention.

This political backing is likely to impact investor sentiment, especially in sectors like technology and electric vehicles, as market participants assess the potential implications of Trump’s policies on these industries.

How can you tap into the potential of the US stock market?

Direct investment

The first option is direct investment. You can open an account with a broker that provides access to the US stock market. Some Indian brokers partner with US-based brokers to facilitate stock trading, while others allow you to directly open accounts with US brokers.

Few things to keep in mind

• Sending money abroad through a broker can be risky, especially if you don’t choose a reliable platform.
• Under the Liberalised Remittance Scheme (LRS), you can invest up to $250,000 annually in foreign markets.
• The money you invest cannot be used for speculative instruments, so it’s important to be aware of the types of investments allowed.

Mutual fund route

If you're new to investing, mutual funds are a convenient option. Many Indian mutual funds directly invest in US stocks or through a Fund of Funds (FOF) model. FOFs invest in other mutual funds, providing indirect exposure to US markets.

Key benefits

• Your investments are managed by professionals who select stocks on your behalf.
• Your money is spread across multiple US companies, reducing risk.

Limitations:

• Indian mutual funds have caps on how much they can invest in foreign equities, so you need to watch out for when the investing window opens.
• These funds may not always be available, as there are restrictions on foreign investments in Indian mutual funds.

ETFs (Exchange-Traded Funds)

ETFs allow you to invest in a range of US stocks through a single investment, and they’re traded like individual stocks. ETFs are a flexible and cost-effective way to invest in the US market, especially for those who want to maintain control over their investments.

Key benefits

• You can buy and sell ETFs on the stock exchange, giving you flexibility and control.
• ETFs generally have lower fees compared to mutual funds, which typically charge up to 2% in expense ratios.

However, one potential drawback is liquidity issues if the ETF isn’t frequently traded.

GIFT Nifty route

The GIFT Nifty route, available on the NSE International Exchange, is another option. This allows you to invest in US stocks through depository receipts issued by brokers who buy US shares.

Key benefits

• It offers a safer alternative since it's regulated by the Indian exchange.
• The process is relatively straightforward compared to dealing directly with foreign exchanges.

However, be aware of the currency conversion charges, which can add to your transaction costs, and the limited stock options available on the NSE International Exchange, with potentially lower liquidity compared to the US market