How Indian Retailers Can Invest in Global Markets Through LRS

As a retailer in India, expanding your financial horizons by investing in international markets like the USA and Europe can be a great way to diversify your portfolio. The Liberalized Remittance Scheme (LRS) by the Reserve Bank of India (RBI) allows Indian residents to invest abroad legally. This article provides a step-by-step guide on how you can leverage LRS for global investments, potential past returns, and withdrawal implications.

Why Diversify into Global Markets?

While many Indian investors focus on domestic opportunities through education, jobs, and local stock markets, diversifying internationally is crucial for mitigating risks. History has shown that markets can face extreme downturns, such as the Vietnam stock market crash, which eroded 43% of investor wealth. Moreover, geopolitical tensions, trade wars, and economic slowdowns can heavily impact a single country's economy. Investing in global markets provides a hedge against such risks, ensuring stability and access to stronger, more resilient economies like the US and Europe.

Understanding the Liberalized Remittance Scheme (LRS)

LRS allows resident individuals to remit up to $250,000 per financial year for investment, education, travel, or other permissible transactions. This makes it an excellent route for Indian retailers to invest in foreign stocks, mutual funds, bonds, and even real estate.

Step-by-Step Guide to Investing Overseas via LRS

1. Choose Your Investment Vehicle

Before investing, determine the type of asset that aligns with your financial goals:

• Stocks & ETFs: Invest in top global companies listed on exchanges like NYSE and NASDAQ.

• Mutual Funds: Invest in funds managed by international asset management firms.

• Real Estate: Purchase properties in key global locations.

• Bonds: Invest in sovereign or corporate bonds.

• Alternative Assets: Include REITs, commodities, or private equity funds.
  

2. Select a Brokerage or Investment Platform

You will need an international investment account. Some popular platforms include:

• Indian Brokers with Global Access: ICICI Direct Global, HDFC Securities, Kotak Securities, etc.

• Foreign Online Brokers: Interactive Brokers, Charles Schwab, TD Ameritrade, etc.

• Investment Apps: Winvesta, Vested, INDmoney offer easy access for Indian investors.
  

3. Complete KYC & Open an Account

• Submit PAN, Aadhaar, and proof of income.

• Provide a FEMA declaration for overseas investments.

• Open a Foreign Currency (FC) Account, if necessary.
  

4. Remit Funds Through a Bank

• Use authorized banks like SBI, HDFC, ICICI, or Axis.

• Submit an A2 form and declaration under LRS.

• Funds are transferred in USD, EUR, or GBP based on your investment preference.
  

5. Invest in International Assets

Once the funds reach your brokerage account, allocate them as per your investment strategy. Consider diversification across sectors and geographies to manage risk.

6. Monitor and Rebalance Portfolio

• Track market trends and economic indicators.

• Review your investments periodically.

• Rebalance based on risk appetite and goals.

Apps in India That Facilitate International Investments

Several Indian platforms help investors access global markets under the LRS:

1. INDmoney (indmoney.com) – Offers fractional investing in US stocks and ETFs.

2. Vested Finance (vestedfinance.com) – Enables direct investments in US stocks.

3. Appreciate (appreciatewealth.com) – Helps Indians invest in US markets.

4. HDFC Securities (hdfcsec.com) – Provides global investing services under LRS.

5. Kuvera (en.wikipedia.org) – Partners with Vested Finance for US stock investments.
   

These platforms simplify international investing by handling compliance, currency conversion, and offering user-friendly interfaces. Ensure you check their fee structures, tax implications, and features before choosing one.

Past Returns: How Global Markets Have Performed

US Stock Market Performance

• The S&P 500 index has historically returned around 10-12% annually over the past few decades.

• Stocks like Apple, Microsoft, and Tesla have delivered multi-fold returns over the years.

European Market Performance

• The FTSE 100 (UK) and Euro Stoxx 50 (Europe) have grown at 5-8% annually.

• Strong sectors: Pharmaceuticals, luxury brands, and financial services.

Emerging Markets vs Developed Markets

• US & European stocks have outperformed most emerging markets over long periods.

• Currency depreciation of the INR against USD (~3-5% annually) also benefits Indian investors in dollar-denominated assets.
  

Withdrawal and Tax Implications

1. Capital Gains Tax

• Stocks & ETFs:

  • Long-term (holding >24 months): 20% tax with indexation.

  • Short-term (holding <24 months): Slab rate taxation.

• Mutual Funds & Bonds:

  • Taxed based on holding period and fund type.

2. Dividend Tax

• Foreign dividends are taxed at 25-30% in the source country.

• You can claim foreign tax credit while filing Indian Income Tax returns.

3. Repatriation of Funds

• Withdrawals are routed back through your Indian bank account.

• RBI may require disclosures for large repatriations.

• Some countries impose withholding tax on profits, so check the applicable rates.

Final Thoughts

Investing in global markets under LRS can help Indian retailers diversify, access higher growth opportunities, and hedge against INR depreciation. However, understanding tax implications, currency exchange risks, and platform selection is crucial before starting your investment journey.

If you need expert guidance on international investing, Ultimate Value Trust can help you structure an effective global investment portfolio. Reach out to us today!