S&P 500

What it is

The S&P 500 is a market-capitalisation-weighted index of 500 leading US companies — Apple, Microsoft, Amazon, Alphabet and the rest of corporate America's heavyweights. It is the most widely followed benchmark of the US stock market and, by extension, a proxy for the world's largest economy. Because it is cap-weighted, the biggest companies carry the most influence, which in recent years has meant a handful of giant technology firms driving much of its movement.

How Indian investors can access it

Indian investors increasingly want a slice of the US market, and there are several routes. The simplest is a domestic feeder fund — for example, an Indian index fund that invests in the S&P 500 and gives rupee-denominated exposure without needing a foreign brokerage account. The second route is direct investment abroad under the RBI's Liberalised Remittance Scheme (LRS), which lets a resident remit up to $250,000 per financial year, including for buying foreign shares.

The GIFT City route is another option: NSE IFSC allows residents to trade around 50 top US stocks as depository receipts, also within the LRS limit.

The constraints to know

There are real limits. The 2025 Budget raised the TCS-free LRS threshold to ₹10 lakh per year, above which tax is collected at source on overseas remittances. More importantly, Indian mutual funds face an industry-wide cap of about $7 billion on overseas investments. When that cap was nearly breached in early 2022, SEBI advised fund houses to halt fresh investment in foreign stocks — so investors in S&P 500 feeder funds suddenly could not add money, and some AMCs later resumed inflows only with monthly caps. This is a structural quirk Indian investors must watch.

Why it matters

For diversification, exposure to the S&P 500 lets an Indian portfolio participate in global technology leaders and the US economic cycle, denominated effectively in dollars — which can cushion against rupee depreciation. But the access routes come with caps, taxes and the risk of inflows being frozen when the industry limit is hit. Before allocating, check which route you are using, the LRS and TCS rules, and whether your chosen fund still has headroom under the overseas-investment cap.