Tesla stock prices have gone up from USD 84.34 in Jan 2020 to over USD 800 levels in Jan 2021, delivering phenomenal multibagger returns in a short span of just one year. In December last year, Tesla became a part of the S&P 500, an index which measures the performance of 500 large companies listed on stock exchanges in the United States and includes giants like Apple, Coca-Cola, Berkshire Hathway, Microsoft and Facebook.
This unprecedented growth in Tesla stock prices can be attributed to its disruptive technology in electric vehicles and clean energy.
Recently Tesla has also overtaken Japanese auto giant Toyota to become the most valued automobile company globally. Tesla stock price was just USD 10 when the company went public in the year 2010. This meteoric rise in Tesla stock price has created massive wealth for patient stockholders of the company.
With this many Indian investors are asking the same question "How to invest in Tesla stock from India"?
Well, here's the answer:
Choose a domestic stock broker which offers overseas equity investment
Some stockbrokers in India have partnered with foreign brokers to offer overseas equity investment. The foreign brokers act as an intermediary, thus allowing you to place trades using the platform provided by the Indian stockbroker. It is also known as an overseas trading account.
Open an account with an international broker
Many international brokers offer equity investing services in the USA to investors based in India, such as Charles Schwab and Interactive Brokers.
To open the account, you will need to submit a full set of KYC documents including your PAN, proof of identity, proof of residence, latest bank statement etc. Once your account is opened, you need to transfer the funds. An important point to remember here is that one can invest only up to the extent of funds available in the trading account as margin trading and short selling is not permitted.
Sounds exciting? All set to invest in Tesla stock?
Wait, here are some essential things to keep in mind before investing in the US stock market
As per the RBI's Liberalised Remittance Scheme (LRS), an Indian citizen can invest a maximum of $250000 outside India in a single financial year. Considering the current exchange rate of Rs. 73, this amount would amount to approximately Rs. 1,82,50,000.
As the brokerage and other charges applicable will be charged in USD, you may incur higher investment costs.
Most international brokers require individual investors to have a minimum requirement of funds. In case the investor fails to maintain this requirement, a fee will be charged.
Fluctuations in the exchange rate will affect your profits.
An alternate route to investing in stocks of American companies is through mutual funds which offer US-focused funds. However, a significant drawback of this investing method is that investors do not have the freedom to select stocks in which he/she wants to invest.
While investing in American companies like Tesla, an investor may not be aware of specific local/global factors that can impact its future performance. For example, a sudden change in state-level legislation. Earlier this year, Tesla's factory in Fremont, California was forced to shut down temporarily over concerns for worker safety due to Covid 19 pandemic.
Dividends received are taxable at a rate of 25%. As there is a tax treaty in place between India and the USA to avoid double taxation, an investor can avail tax benefit in India for the tax already paid on dividend in the USA.
Investing in the Tesla stock or any other stock in the American stock market does offer the opportunity to invest in global companies for diversification and better prospects.
Indeed, American companies like Google, Microsoft, Walmart, Apple and Berkshire Hathway have created unprecedented wealth for investors. But so, have Indian companies like Wipro, Reliance, TCS, HDFC Bank, Maruti, MRF, Page Industries and Eicher Motors, to name a few.
However, considering India's fast growth rate, there are many such fantastic investment opportunities present right here. Companies which will grow as they contribute to India's growth story are available at decent valuations.
Click here to invest in a portfolio of stocks with the potential to generate 4-5 times returns over next 5-6 years.