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CFD Trading In India 2024

Written By

Jemma Grist

Written By

Jemma Grist

Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.

» Jemma Grist Profile Page

Edited By

Tobias Robinson

Edited By

Tobias Robinson

Tobias is a partner at DayTrading.com, director of a UK limited company and active trader. He has over 25 years of experience in the financial industry and contributed via CySec to the regulatory response to digital options and CFD trading in Europe. Toby’s expertise and dedication to financial education make him a trusted voice in the industry, including a BBC investigation into digital options.

» Tobias Robinson Profile Page

Fact Checked By

William Berg

Fact Checked By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

» William Berg Profile Page

Updated

Jul 24, 2024

CFD trading in India can open the door to lucrative markets. But firstly, is online CFD investing allowed and legal in India? We’ll explain the rules and how CFDs work.

Best CFD Brokers in India

What Is A CFD?

A contract for difference (CFD) is a derivative, meaning you don’t take ownership of the underlying security. Essentially, two parties agree to exchange the difference between the current asset’s price and the market value at the contract close.

Let’s say you were trading CFDs on Indian stocks, such as Coal India. If the market moved against you, you would pay the brokerage the difference between the current market price and the value of the asset at the contract time. If the market moved in your favour, the firm would instead pay you the difference.

Markets

CFD trading in India is attractive because it allows for market diversification. You can trade on stocks and shares, forex, futures, options, gold, and more. And because online CFDs are a relatively straightforward instrument, it’s easy to switch between commodity trading and the Indian stock market index, for example.

Finance

The other benefit of CFDs is the ability to trade on leverage. Brokerages take collateral, known as margin, and then lend you funds so you can take position sizes that wouldn’t be possible with your cash balance alone. Not only does this increase the size of possible returns, but it also means you have capital left to take positions elsewhere. On the flip side, leveraged investing does increase risk exposure.

For more information on CFD basics, including day trading strategies, see here.

Is CFD Trading In India Legal?

Whether CFD trading in India is legal and allowed is a grey area. The Securities and Exchange Board of India (SEBI) hasn’t yet rolled out laws to regulate CFDs. As a result, there isn’t a licensing system, which means you can’t find regulated firms based in India. Instead there are many unlicensed websites, where users won’t receive any legal protection.

So, if you want to trade CFDs on Indian stocks, for example, you need to turn to companies based outside of India. Likewise, Indian residents will need to turn to overseas providers.

Best Platforms

What the best trading platform is for CFD trading in India will be down to the user. With that said, the MetaTrader 4 (MT4) desktop and mobile platform is the most widely used. It’s reliable, easy to pick up, and allows for advanced charting and pattern analysis. The Traders Workstation (TWS) is another popular choice. Fortunately, many firms today offer multiple options. Sign up for a demo account and have a play around to see which system works for you.

FAQ

Is CFD trading legal in India?

Whether CFD trading is legal in India is unclear. There isn’t effective regulatory oversight through a licensing system, so Indian investors will need to open accounts with respected overseas brokers. Non-Indian residents can also trade CFDs on Indian stocks through offshore brokerages.

How do I trade CFDs in India?

To start day trading CFDs in India, you will first need to open an account. Once you’ve deposited funds into your account you can then take a position on your trading platform. For guidance on CFD trading strategies, including risk management advice, see here.

How much money do I need to start CFD trading in India?

Minimum account deposits vary among providera, but you can start trading CFDs with 4,000 INR. Margin requirements will also change depending on the provider, but are often between 5% and 25%.

Is it free to make deposits and withdrawals CFD trading in India?

Whilst deposits and withdrawals are usually free, if you’re using an offshore CFD broker there may be a currency conversion charge.

Do I need to pay taxes on CFD trading in India?

Profits generated from CFD trading in India may be taxable. The extent of your tax obligations will depend on how your trading activity is classed. See our guide to trading taxes in India for further guidance on day trading taxes.

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