To many people, trading is synonymous with New York, London, the Orient, with Australia and mainland Europe thrown in for good measure. However, financial dealing is also very common in India and it is possible to trade forex, along with conventional stocks and shares as well as futures.
In actual fact the oldest Stock Exchange in Asia lies in India, the Bombay Stock Exchange, which is still the eighth largest market place in the world. India has a total of 22 exchanges but the majority are not internationally accepted, unlike the Bombay Stock Exchange.
However, despite India being a hub for financial trading, there are a number of restrictions that forex investors will find themselves up against which could potentially hamper how they trade.
Whilst the Indian currency, the Rupee, has started to appear in forex pairs, the volumes are very low and the potential for gains significantly limited. This is because the Indian economy is more isolated than many other nations who trade, meaning that the currency sees far less movement due to the attached regulation. Therefore, it is necessary to convert Rupees to US Dollars before beginning to trade.
This may sound straightforward, but in India there are strict rules over currency conversion. The Reserve Bank of India has recently relaxed the rules and residents are now permitted up to $200,000 per annum – but they are not allowed to trade with it and therein lies the problem. The RBI prohibits trading with the money converted which makes the $200,000 useless for forex purposes.
It is of course possible to lie about the purpose of the conversion and hope not to be caught. However, this is highly illegal in India and not recommended under any circumstances.
A legal alternative is to arrange for a friend or relative outside of India to transfer money into your account as there are no limitations on this. However, whilst it is legal to receive money via money transfer systems, it is not possible to send funds the other way.
A third option is to use online virtual currencies, such as e-gold, but these are not regulated and mean that any dispute is liable to end in tears as you will be unable to irrevocably prove you had money invested.
If you manage to find your way around the thorny issue of currency conversion, little else will stand in your way of trading. Every investor will require a bank account held with one of the large recognised institutions as well as a demat account.
A demat account is similar to a personalised number which officially allows trading in India. Demat is short for dematerialized and is an expression of documents being relayed into an electronic format. It is only used on the stockmarket and acts as a replacement for the sheaf documents which were required before the digital age hit India. A demat account is essential for traders who wish to diversify and can easily be set up with assistance from nearly every bank.
There are forex brokers who are based within India but they are subject to more restrictions than those that operate within India but are based outside. Indian based brokers are only permitted to offer USD/INR pairings at present and the majority also are fee charging, unlike forex brokers based elsewhere in the world.
Although the restrictions on transacting business within India are very different, the way in which pairings should be traded remains exactly the same. Just as in other nations, keeping up to date with forex news is vital and using a myriad of tools to help predict markets will help to bring profits.