The NASDAQ 100 is one of the most renowned indices globally, featuring the top 100 non-financial companies listed on the NASDAQ Stock Market. It is dominated by technology giants like Apple, Microsoft, and Amazon, making it a preferred investment choice for those looking to gain exposure to the U.S. tech sector and other leading industries. For Indian investors, buying a NASDAQ 100 ETF offers a way to participate in the growth of these companies without needing to directly purchase individual U.S. stocks.
This guide explains the steps and options available to buy a NASDAQ 100 ETF from India, the benefits of doing so, and key considerations.
What is the NASDAQ 100 ETF?
An Exchange-Traded Fund (ETF) is a basket of securities that tracks an index, sector, commodity, or asset. The NASDAQ 100 ETF, in particular, mirrors the performance of the NASDAQ 100 index. Instead of investing in each of the 100 companies individually, buying an ETF provides exposure to all of them simultaneously, making it a cost-effective and diversified choice.
ETFs are traded on stock exchanges, much like individual stocks, allowing for easy buying and selling during market hours.
Why Should Indian Investors Consider the NASDAQ 100 ETF?
Diversification and Growth Potential
The NASDAQ 100 consists of leading global companies, particularly in technology, healthcare, and consumer services. Investing in the NASDAQ 100 ETF allows Indian investors to diversify their portfolios and tap into the growth potential of global markets.
Hedge Against Domestic Risks
Investing internationally can act as a hedge against domestic economic or currency risks. If the Indian rupee depreciates against the U.S. dollar, your returns from the NASDAQ 100 ETF may increase when converted back to rupees.
Ease of Investment
With the availability of domestic and international brokers, Indian investors can now easily access the NASDAQ 100 ETF without needing to open complicated foreign trading accounts.
Steps to Buy NASDAQ 100 ETF in India
Step 1: Understand Your Investment Options
Indian investors have two main ways to invest in the NASDAQ 100 ETF:
Indian Mutual Funds or ETFs Tracking the NASDAQ 100
Several Indian fund houses offer mutual funds or ETFs that track the NASDAQ 100 index. These funds invest in international ETFs or directly in the U.S. markets to replicate the NASDAQ 100’s performance.
Direct Investment in U.S. ETFs
Indian investors can directly buy U.S.-listed ETFs, such as the Invesco QQQ ETF, which tracks the NASDAQ 100. This requires an international brokerage account.
Each option has its own benefits and considerations, which will be discussed in more detail.
Step 2: Choose a Platform for Investment
Investing Through Indian Fund Houses
Indian fund houses, such as Motilal Oswal and Nippon India, offer NASDAQ 100-focused mutual funds or ETFs. These funds allow you to invest in rupees, avoiding the need for currency conversion or international accounts.
You can open an account with an Indian broker like Zerodha, Upstox, or Groww, and search for the NASDAQ 100 ETFs or mutual funds they list.
Investing Through International Brokers
To invest directly in U.S.-listed ETFs like the Invesco QQQ, you need an international brokerage account. Platforms like Vested, INDmoney, and Stockal provide Indian investors access to U.S. markets. Alternatively, global brokers like Interactive Brokers and TD Ameritrade also serve Indian clients.
Opening an international account typically requires additional documentation, including PAN and proof of address, and a minimum investment amount may apply.
Step 3: Fund Your Account
For Indian fund houses, you can fund your account in rupees using net banking, UPI, or other domestic payment methods. For international accounts, you will need to transfer funds in U.S. dollars. This involves using the Liberalized Remittance Scheme (LRS), which allows Indian residents to remit up to $250,000 per financial year for investments abroad.
Banks or brokers handling the currency conversion may charge fees for the transfer, so compare rates before proceeding.
Step 4: Choose the Right NASDAQ 100 ETF
Indian Options
Motilal Oswal NASDAQ 100 ETF: This ETF is a popular choice for Indian investors, offering low expense ratios and rupee-based transactions.
Nippon India ETF NASDAQ 100: Another reliable option, tracking the index efficiently.
U.S.-Listed ETFs
If you prefer direct exposure, consider investing in the Invesco QQQ ETF, which is highly liquid and widely traded. Compare the expense ratios, tracking efficiency, and performance of the ETFs to select the best fit for your goals.
Step 5: Execute the Trade
Once your account is set up and funded, you can purchase units of the NASDAQ 100 ETF. Search for the ETF using its name or ticker symbol, select the quantity you want to buy, and place your order. Transactions are confirmed instantly during market hours.
For Indian fund houses, the process is straightforward and similar to buying other domestic mutual funds or ETFs. For international ETFs, ensure you account for time zone differences when trading.
Step 6: Monitor Your Investment
After purchasing the NASDAQ 100 ETF, it’s important to monitor its performance periodically. Factors such as U.S. market conditions, currency exchange rates, and sectoral trends can impact your returns. Use tools offered by your broker to track the ETF’s price and set alerts for significant changes.
Things to Consider Before Investing in the NASDAQ 100 ETF
Currency Exchange Rates
When investing in international ETFs, currency fluctuations between the Indian rupee and U.S. dollar can significantly affect your returns. A weakening rupee can enhance your gains, while a strengthening rupee may reduce them.
Expense Ratios and Fees
Compare the expense ratios of different ETFs, as these charges can impact your net returns over time. Additionally, check for brokerage fees, currency conversion charges, and other hidden costs.
Tax Implications
Investing in the NASDAQ 100 ETF involves tax considerations, both in India and the U.S. Dividends from U.S. stocks are subject to withholding tax in the U.S., and your gains are also taxable in India. It’s advisable to consult a tax advisor for clarity.
Market Risks
The NASDAQ 100 is heavily weighted toward the technology sector, making it susceptible to tech industry volatility. Diversify your investments to mitigate risks.
Conclusion
Buying the NASDAQ 100 ETF in India is an excellent way to gain exposure to some of the world’s leading companies and diversify your portfolio globally. Whether you choose to invest through Indian fund houses or directly in U.S.-listed ETFs, the process has become relatively straightforward. However, it’s essential to research thoroughly, understand the associated risks, and consider factors like currency exchange rates, tax implications, and expenses.
With careful planning and informed decision-making, investing in the NASDAQ 100 ETF can be a rewarding addition to your financial strategy.
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