Yes, NRI can invest in both in Indian Stock Market  and mutual funds in India, provided they have an NRE savings account in India. Investing in a Mutual Fund is simpler than investing directly in Stocks because you do not need a Demat account to spend in the Mutual fund and there is also a quantity restriction for NRI that invests directly in Stocks.

So if you do not want to invest through the trouble of starting a Demat account and a Portfolio investment account, needed by RBI to keep the record of NRI investments on the stock market, it is better to invest in Mutual funds and exchange traded funds.

Now you can buy Mutual funds directly from your NRI account, for example, you can buy investment funds directly from Their Netbanking interface using HDFC NRE accounts.

Can NRI use its resident DMAT account to invest in Indian  Stock Market?

One of the common doubts among non-resident Indians is that whether they can use their existing DMAT account for investment in Stock market or not? The answer is no. You cannot use your existing resident DMAT account to invest in shares, this is against the RBI guidelines.

All NRIs wishing to invest in the exchange must have PINS account and all transactions must be posted by their dedicated PINS account. You should notify your bank about your NRI status so that it can change the DMAT account accordingly.

The RBI required all transactions through a dedicated PINS account because there is a predefined threshold for NRI investments in a company’s stock, for example an NRI cannot hold more than 10% shares in each company.

Restrictions on NRI investments in the Indian Stock market

Apart from an NRE account, a DMAT account and a PINS account here are some other limitations on NRI investment on Indian stock market.

• Unlike residents, non-residents Indians cannot do day trading. Which means that they must accept the stocks, i.e. If you purchase a stock today, then you can only sell it after two days as soon as the previous transaction has been executed and the stock is credited to your DMAT account.
• An NRI cannot hold more than 10% of the total investment in India listed companies. (20% for public-sector banks, e.g. SBI)
• Only one PINS account is allotted to NRI. You cannot hold more than one PINS account.
• NRIs must notify their bank and broker about any change in their status and update KYC immediately.

Thus, in short, NRI can invest in Indian stock market and buy mutual funds, but there is a bit of trouble to invest directly in stocks, but buying a mutual fund is very simple because all you need is an NRE savings account. By using this account, you can open NRE fixed deposit as well as you can purchase units of mutual funds.

For US-based NRI, there is a limitation on the purchase of mutual fund units from US-based fund buildings, imposed by SEC. So it is better that you invest through an Indian fund house, e.g. ICICI, HDFC or SBI, you must also complete FATCA requirements.

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