How to invest in the Bombay Stock Exchange from Singapore

• Information about the workings of the Bombay Stock Exchange (BSE).
• Easiest ways to invest in the BSE, whether or not you have ties to India.
• Pros and cons of investing in the BSE.

The Bombay Stock Exchange, now known as the BSE, is owned and operated by BSE Limited and is located in Dalal Street, Mumbai. It was first established in 1875, and is the oldest stock exchange in Asia.

There are seven recognised stock exchanges in India: the BSE, the National Stock Exchange (NSE, New Delhi), the Calcutta Stock Exchange (CSE), the Indian Commodity Exchange (ICEX, Mumbai), The Metropolitan Stock Exchange of India (MSE, Mumbai), the Multi Commodity Exchange of India (MCX, Mumbai) and the National Commodity and Derivatives Exchange (NCDEX, Mumbai).

The BSE is not the largest stock exchange in India measured by trading volume — that title goes to the NSE — but with more than 5,000 listed companies, the BSE (also the world’s fastest stock exchange for trade speed) is a popular investment destination for Singaporean investors, especially those with ties to India.

This is your complete guide to investing in the Bombay Stock Exchange from Singapore.

For people with ties to India

There are limits to direct investment in Indian companies by non-residents of India. According to the Reserve Bank of India, Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) are allowed to invest in Indian shares and debentures directly, although to a limited extent, most commonly amounting to 10% of the company’s total paid-up equity capital. To do this they must open a Portfolio Investment Scheme (PIS) and also have a demat account.

Some companies, such as Nexus Software Ltd and DSQ Biotech Ltd, have already reached their limit, so that no further shares can be sold to NRIs and PIOs. Overall, investing directly in Indian shares from Singapore is a complicated process, but don’t worry – there are plenty of other ways to invest in Indian company shares.

For everyone, including those with ties to India

To avoid the complicated paperwork and restrictions that apply to direct Indian share investment from Singapore, choose one or more of the following options instead.

Invest in Indian companies

There are no individual Indian companies listed on the Singapore Exchange (SGX). However, you could consider investing in SGX Nifty 50 Index Futures contracts, which are derivative investment products based in India’s Nifty 50 (see ‘Buy units in Indian Exchange Traded Funds’ below). However, if this sounds too complicated, you could instead choose to buy shares in Indian companies listed on stock exchanges in the USA or UK, trading in USD. Some examples are:

• Infosys (NYSE: INFY and LON: 0XSE)
• Tata Motors (NYSE: TTM and LON: 0LDA)
• Dr. Reddy’s Laboratories Ltd (NYSE: RDY)
• HDFC Bank Limited (NYSE: HDB and LON: 0A71)
• MakeMyTrip Limited (NASDAQ: MMYT)

Buy units in Indian Exchange Traded Funds (ETFs)

An ETF is an investment which pools the funds of unit holders to purchase a basket of shares or other securities to track the performance of a particular market sector or investment strategy. By purchasing ETF units you can spread your risk (because you’re not exposed to the ups and downs of a single company share price) but still focus on a particular market index, such as shares listed on Indian stock exchanges.

A market index is a hypothetical share portfolio that represents a part of the market, such as the top 100 companies listed on an exchange, weighted by market capitalisation. It’s an indicator that helps investors to compare the current market performance with past performance. You can’t buy shares in a market index, but you can buy units in ETFs which aim to mirror the market index by buying shares in the same companies in the same ratio.

The BSE’s major market indices include the BSE SENSEX (BSE 30), the BSE SENSEX 50, and the BSE SENSEX Next 50, and there are ETFs listed on the BSE which track these market indices. However, investing in them directly would involve the same complicated process as investing in Indian shares. Residents of Singapore will find it easier to invest in SGX-listed ETFs which track Indian stock exchange indices or otherwise invest in Indian stocks, for example:

• iShares MSCI India Index ETF (SGX: I98 in USD and QK9 in SGD): Aims to mirror the MSCI India Index, which tracks the performance of 109 large and mid-cap segments of the Indian market – about 85% of the total market.
• Lyxor ETF MSCI India (SGX: G1N). Also mirrors the MSCI India Index. Priced in USD.

Singaporean investors can access a wider range of Indian equity ETFs on the New York Stock Exchange, NASDAQ, the London Stock Exchange and the Euronext.

Step 1: Choose a broker

When you buy shares online, you do it through an intermediary called a broker. There are hundreds of online brokers available, offering various options.

Some key features to look for when choosing an online broker:

• Low-cost brokerage
• Easy-to-use trading platform
• Research and reporting
• Demo account so that you can practise trading first without risking real money

If you are eligible to invest directly in companies and ETFs listed on the Bombay Stock Exchange (as a result of your ties to India and having completed the required steps and paperwork) you also need to make sure that you choose a broker offering access to the Bombay Stock Exchange from Singapore.

Step 2: Decide how much you want to invest

You should always have an investment budget based on what you can afford. You can always buy more later if the price drops, or when you have more funds available.

Step 3: Fund your account

Share trading accounts need money added to them to become fully active, but in the early stages, it's a good idea to be cautious about how much you add.

To trade in the Bombay Stock Exchange directly you may need to fund a trading account in Indian rupees, separate from your SGD account. Alternatively, your broker will perform a currency conversion to Indian rupees when processing your order. Either way involves paying foreign exchange fees, and it may be easier to simply invest in the iShares MSCI India Index ETF (with the ticker QK9, which trades in SGD).

Step 4: Choose between shares and ETFs

ETFs usually track market indices and are therefore diversified across multiple companies, so they typically experience lower price volatility than individual company shares and can be better for long-term investment.

For Singapore residents it’s also easier to invest in locally listed ETFs which track Indian company shares, rather than trying to invest in individual Indian companies or BSE-listed ETFs. ETFs can often be traded commission-free.

Step 5: Decide your order type

Orders are your method of telling your online broker what sort of trade to make, and how you'd like your money to behave. Depending on the broker you use, you can configure many different kinds of order.

• A market order is the most straightforward, requiring virtually no setup. Once executed, you’ll get shares at the next market price for the share or fund unit.
• If you have a specific strategy, then you’ll probably want more options in terms of configuration. Some brokers have highly customisable orders that can be triggered by events, meaning you can buy or sell when your chosen share or fund hits a price target.

Step 6: Place your order

Once you're happy with your strategy and with funds in place, it's time to trade. On most platforms, you can place your order with the click of a button.

Step 7: Monitor your investment

Whether you are investing to gain from speculation on price fluctuations or as a long-term investment, you should keep monitoring the fund’s or company’s performance and its price movements.