How to Trade Indian Stock Market?

India has a vibrant and dynamic stock market.

Only a certain segment of investors is free to trade directly in the Indian stock market. As an American investor, you most likely will be shut out from direct trading on the Indian stock market, unless you're a non-resident Indian citizen. Americans can still gain access to certain Indian securities through the American Depositary Receipt market, through which Indian companies can trade on the American stock exchanges.

Difficulty:

Moderately Challenging

Instructions

Things You'll Need

• Computer
• Internet connection
• One 21 inch Monitor, to have 24" is best
• Charting software
• Indian Stock Market End-of-Day Data feed

1. Buy directly on the Indian Stock Exchange. This option only applies to Indian citizens living in India. If you're an American citizen, this isn't an option for you, even if reside in India. If you're an Indian citizen, you can buy and sell stocks through Indian financial institutions, as you can in America, by placing orders and waiting for executions.

2. Register a Portfolio Investment Scheme. Available through banks that are authorized to trade on the Indian Stock Exchange, Portfolio Investment Schemes (PINS) are required for non-resident Indian citizens to buy and sell on the Indian Stock Exchange. The PINS option is not available to U.S. citizens.

3. Place trades through the bank holding your PINS. As a non-resident Indian investor, you can give buy and sell orders to the bank holding your PINS much as you would buy and sell a stock on an American exchange. The bank will execute the order for you and provide you with a confirmation.

4. Buy American Depositary Receipts (ADRs) on an American stock exchange. This is the most accessible way for American citizens to buy Indian stocks. ADRs are foreign securities that have been packaged to trade on American exchanges in an almost identical fashion to American stocks. Examples of Indian ADRs trading on American exchanges are Satyam Computer Services and Infosys Technologies, trading under symbols SAY and INFY, respectively.

5. Buy Indian mutual funds. While not directly buying and selling on the Indian stock exchange, you can get access to a diversified portfolio of Indian stocks by purchasing a mutual fund dedicated to Indian securities. The India Fund, for example, trades as a closed-end mutual fund on the New York Stock Exchange under the symbol IFN.

Tips & Warnings

• Start Trading with smaller sizes till you are consistently profitable.

• Always honor stop loss points even if you become professional trader

• Do not invest large amount on single bet.

• Do not use margin money at start

• Keep emotions like Fear and Greed under control

References

• The Motley Fool; Indian Stocks You Can Actually Buy; Jordan DiPietro; July 12, 2010
• Jayesh Patel: How to Invest in Indian Stocks 101
• Rediff India Abroad; Want to Buy Stocks in India? PINS a Must; February 20, 2008
• The Motley Fool; What Are ADRs?; January, 2005
• Blackstone: Closed-End Mutual Funds -- India Fund