The year 2020 saw a surge in the opening of new demat accounts that allow investors to trade in equities. With over 10 million accounts added last year, India’s tally stood at over 47 million accounts as on December 7, 2020. This number was at 18 million in April 2011.
This 3x surge suggests that more Indians than ever before are technically equipped to trade in the markets today.
With fintech platforms emerging, trading in market linked assets has been simplified by eliminating brokers. According to Lalit Keshre, CEO, Groww, information asymmetry is now getting bridged.
“Over the last many years, the information arbitrage that institutional investors used to have, or information that was accessible only to a select few and not everybody, has been solved for. Now everybody has the same information available and a lot of awareness and education. That has given rise to more DIY investments,” he said.
Asked if Indians are ready to bypass the broker and wealth manager route and make investments on their own, Keshre said: “We have 10 million registered users on our platform. The beauty of internet is that it is truly democratic. So, a person in Bangalore or Patna or Ahmedabad or Indore gets the same level of information in the most transparent way. More than 60% of our users are beyond our top six cities. And more than 60% of our investors are first-time investors.”
At present, Groww is serving its customers with research and transaction services, but staying away from the advisory space. However, the company does plan to go the advisory route in a few years.
“We will get into advisory services, but not in the near future because it’s a tough problem to solve,” he said.
Indians can invest in US stocks and there is regulatory and taxation clarity around this. According to the Reserve Bank of India’s website, “Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to $2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.”
That trend is catching momentum with Indians vying for global technology stocks. “There’s a lot of regulatory clarity. People in India buy stocks like Google, Facebook, Tesla etc,” Keshre said.
On the tax front, tax expert Sharad Kohli said that under the present tax treaty, “if an Indian derives income which may be taxed in USA, then India will grant credit of taxes withheld in USA”.
When filing tax for the same income in India, an investor will be subjected to the same short-term or long-term capital gains taxes, depending upon the holding period of the security under or over one year.
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