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February 28, 2011The Reserve Bank of India has clarified that Indian individuals cannot trade in the forex markets under FEMA rules.Note a number of Indian brokers and forex companies were advertising heavily promising big returns to retail investors.Note forex markets are extremely tough to trade even for professional traders for institutions.For retail investors they are a sure shot way to lose money in large amounts.Note forex markets offer much higher leverage than normal Futures Equity markets.Being an effectively zero sum game and requiring high amounts of knowledge ,forex markets are just too sophisticated for retail investors in my view.But they are quite lucrative for forex trading portals and companies whose main target semgent are retail investors.
They continously target newer investors as older ones burn their hands by losing large amounts of money.RBI has said that individuals cannot trade in domestic or foreign markets and has forbidden money transfers and remittances.Note this was a grey area for a long time and had recently been exploiting by a number of companies looking to make a killing.
Individuals cannot trade in forex market: RBI
The Reserve Bank today said resident Indians cannot trade in forex market as per the existing regulation.
The existing regulations under Foreign Exchange Management Act (FEMA), 1999, do not permit residents to trade in foreign exchange in domestic or overseas markets, RBI said in a statement.
The clarification of the RBI assumes significance in the light of several people losing heavily in forge trade through internet portals in the recent past.
It also said, remittance in any form towards overseas foreign exchange trading through electronic/internet trading portals is not permitted under the FEMA.
RBI cautioned investors against advertisements issued by certain electronic and internet portals offering trading or investing in foreign exchange with guaranteed high returns.