Bengaluru: Zerodha has launched a facility allowing eligible Indian investors to buy US-listed stocks and exchange-traded funds (ETFs) through its Kite platform, opening another route for retail investors to diversify beyond domestic markets.

The facility, introduced in beta, gives investors access to up to 2,000 US-listed companies and around 1,000 ETFs. It allows users to invest in well-known global businesses such as Apple, Microsoft and Amazon without opening a separate brokerage account specifically for overseas investments.

The launch could make international investing more accessible to Indian retail investors. However, financial experts and investors must consider currency movements, transaction costs, taxation and overseas investment regulations before allocating money to foreign markets.

How Zerodha’s US investing facility works

Zerodha’s international investing segment allows eligible resident Indian individuals to buy US stocks and ETFs through their existing accounts. Investors can activate the facility online and monitor their international holdings alongside their Indian investments.

The platform routes transactions through BSE’s India INX Global Access at GIFT City, Gujarat, in partnership with overseas brokerage infrastructure.

Investors can access eligible US-listed companies and ETFs, while fractional investing allows them to purchase a portion of a share instead of paying for a complete unit. For example, if a share costs $300, an investor allocating $75 can purchase 0.25 shares, subject to the platform’s eligibility and order conditions.

According to Zerodha’s published information, the offering includes around 1,000 ETFs that meet its asset-size criteria. Certain products, including leveraged ETFs and Bitcoin ETFs, are not available under the current offering.

The facility is currently limited to eligible resident Indian individuals. Non-resident Indians, joint accounts, Hindu Undivided Families, companies, limited liability partnerships and partnership firms are not eligible under the stated conditions.

How US stocks can help diversify a portfolio

One of the main advantages of international investing is geographical diversification. Investors whose portfolios are concentrated in Indian equities can gain exposure to businesses operating in other markets and sectors.

For example, an investor with ₹1 lakh invested in Indian equities could consider allocating ₹20,000 to eligible US investments while keeping ₹80,000 in domestic equities. This is an illustration of diversification, not a recommended allocation for every investor.

International exposure may reduce dependence on the performance of a single country’s stock market. However, it does not guarantee lower losses or higher returns. Indian and US markets can both decline during periods of global uncertainty, and individual overseas stocks can experience substantial price swings.

US-listed companies also provide access to industries and businesses that may have different weightings in the Indian market. These include global technology companies, consumer brands and other large international businesses.

Investors who prefer not to select individual companies may consider ETFs. An S&P 500 ETF, for instance, can provide exposure to a broad group of leading US companies through a single investment. This can reduce the need to research and manage numerous individual stocks, although the fund’s performance still depends on its underlying holdings.

Fractional investing lowers the entry barrier

Fractional investing is another feature that could attract Indian retail investors. Some internationally listed shares have high prices per share, making it difficult for investors with smaller budgets to purchase whole units.

With fractional ownership, investors can buy eligible shares or ETFs in dollar amounts rather than purchasing an entire share. Returns, losses and dividends are proportionate to the fraction owned.

This feature may help investors build exposure gradually instead of committing a large sum to a single expensive stock. However, the ability to invest small amounts does not eliminate market risk or make an investment suitable for everyone.

Brokerage, currency conversion and other costs

Zerodha’s published pricing lists brokerage at 0.10% of the transaction value, subject to a minimum of $0.01 and a maximum of $10 per order. Brokerage applies to both purchases and sales.

Investors must also account for other charges. These include applicable goods and services tax on brokerage, regulatory fees, currency conversion costs and any remittance charges imposed by the bank.

Funding the account requires transferring money from an eligible Indian bank account into a US-dollar wallet through supported net-banking arrangements. Currency conversion means the final rupee cost of an investment can differ from the apparent dollar price.

The rupee-dollar exchange rate is particularly important when calculating returns. If the dollar strengthens against the rupee, an overseas investment’s return may increase when converted back into rupees. If the rupee strengthens, the currency movement can reduce the rupee value of the investment.

Rules and tax implications investors should understand

Overseas investments by Indian residents are governed by the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). The scheme permits eligible resident individuals to remit up to $250,000 per financial year for permitted transactions, subject to applicable rules. This limit covers eligible overseas remittances collectively and is not a separate allowance exclusively for US stocks.

Tax Collected at Source (TCS) may also apply when an individual’s aggregate eligible foreign remittances exceed the applicable threshold. Investors should verify the prevailing threshold, rate and exemptions before transferring funds. TCS generally represents a tax credit that can be adjusted against tax liability or claimed as a refund where eligible; it should not automatically be treated as an investment expense.

Tax treatment of overseas capital gains and dividends differs from that of many domestic investments. The applicable rules depend on factors such as the holding period, the nature of the income and the relevant tax provisions. US dividend withholding and the availability of foreign tax credit relief may also affect the final return.

Investors should therefore review current tax requirements and reporting obligations, including disclosures in their income-tax returns, before making overseas investments.

What investors should consider before investing

Zerodha’s US investing facility offers a more convenient route to international markets, but access alone does not make overseas stocks appropriate for every portfolio.

Investors should first assess their financial goals, investment horizon, risk tolerance and existing exposure to Indian equities. They should also compare total costs, understand currency risks and avoid concentrating their overseas allocation in a small number of popular technology stocks.

International investing is best considered as part of a broader financial plan rather than a substitute for a diversified portfolio. The suitability of any allocation depends on individual circumstances, and past performance does not guarantee future returns.

Zerodha’s entry into US stock and ETF investing expands the options available to Indian retail investors. Whether the facility improves an investor’s portfolio will ultimately depend on the assets selected, the amount invested, the costs incurred and the investor’s ability to manage market and currency fluctuations.