Stock brokerage firm Zerodha will offer US stock market investment by next quarter, founder and CEO Nithin Kamath has said, marking the discount broker’s entry into a segment it has long avoided despite growing competition.
“A lot of people tagged me on social media and asked about the US investing thing. We are working on it and we should have something in the next quarter. It is a product launch,” Kamath said in an Ask Me Anything session with Zerodha founders and top management on YouTube.
The development comes at a challenging time for the Bengaluru-based company, which saw its topline and net profit decline for the first time in over a decade. Its FY25 revenue and profits fell 15 per cent after multiple regulatory changes, including new futures and options (F&O) trading rules, hit the business.
Net profit dropped to ₹4,200 crore in FY25 from ₹5,500 crore in the previous fiscal, while revenue declined to ₹8,500 crore from ₹10,000 crore. The company has warned that FY26 could see an even sharper 40 per cent revenue decline from FY24 levels.
Gift City route
Zerodha has got regulatory clarity through Gift City, India’s international financial services centre. “It has been a long-pending thing. We now have the requisite regulatory clarity through GIFT City. We are trying to build a simple and seamless experience for users in the backend as well as in the frontend,” said Zerodha CTO Kailash Nadh, adding that the company has worked on a series of technology and product developments.
There are two primary platforms in Gift City that facilitate international stock investments—India INX’s Global Access and NSE-IX’s US stocks Unsponsored Depository Receipts (UDRs). India INX is a subsidiary of Bombay Stock Exchange.
The Foreign Exchange Management Act (FEMA) treats GIFT City as an international territory for financial transactions, much like Dubai and Singapore. All financial services, including banking, equity markets and insurance, are regulated by a single unified regulator, the International Financial Service Centre (IFSCA).
Catching up with competition
The Bengaluru-based discount broker has so far shied away from the US investment product, even as multiple brokerages such as Angel One, INDmoney, JM Financial, Axis Direct, HDFC Securities, Kuvera and 5paisa offer the facility.
Groww, another major player, used to allow consumers to invest and trade in US stocks until January 2024. The firm stopped onboarding due to complications within the remittance process and high Tax Collected at Source (TCS) of 20 per cent on investments exceeding ₹7 lakh in foreign stocks or mutual funds.
Regulatory challenges
Earlier, Indian stock brokers enabled US investing through two primary methods: partnering with US brokers or through Indian mutual funds investing in US stocks. However, most mutual funds stopped accepting new investments after hitting the Reserve Bank of India’s (RBI) limits on foreign investment, which capped individual fund houses’ overseas investment at $1 billion and the overall industry’s at $7 billion.
The Gift City route offers a regulatory framework that sidesteps some of these complications, providing Zerodha and other brokers a clearer path to offer international investing to Indian retail investors.