If you want to invest in Indian stocks — like those that list on the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE) — well, I can’t blame you. But you might want to bone up on your breathing exercises.
Investing in emerging markets has required the patience of a saint in recent years. A slowdown in China, the energy bust and a lack of risk appetite among investors have all conspired to push down the values of most emerging-market stocks, including the Bombay Stock Exchange.
While 2016 has been a good year for the BSE and for emerging markets in general, prices have essentially gone nowhere in five years. The theme of the past half decade has been “America or bust!”
Yet if you believe in the long-term India growth story, buying a basket of Indian stocks makes all the sense in the world.
Unlike China — which already has an aging population and an economy tied heavily to low-value manufacturing — India has a young, mostly English-speaking population and a growing services and information economy. It also has a reform-minded government pursuing growth policies … something that is largely absent in most of the developing world these days.
If you want to invest in Indian stocks, you essentially have three options:
#1: Invest Directly in the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE)
This isn’t a particularly easy option for most Americans, as few American brokers have direct access and the laws here are not favorable to foreigners.
Up until recently, trading was limited to “non-resident Indians” meaning you had to be an Indian citizen living abroad or be “of Indian origin.” The market has since been opened to foreigners, but it’s still difficult for a regular investor.
To invest in India, you’d need to be a Qualified Foreign Investor (QFI). To be eligible here, your country has to be a member of the Financial Action Task Force (FATF) and a signer of the International Organization of Securities Commissions (IOSCO). The United States passes on both counts.
Here’s where it gets fun.