What is NASDAQ? A Complete Guide for Indian Investors (2025)

This article covers everything Indian investors need to know about NASDAQ, the world’s second-largest stock exchange. We analyze its unique electronic market structure, the difference between the Nasdaq 100 and Composite indices, and the specific listing tiers for companies. The guide explains three actionable ways to invest from India in FY 2025-26: direct equity via LRS, rupee-denominated ETFs, and the emerging GIFT City route. We also detail the tax implications (LTCG at 12.5%) and trading hours converted to IST.

When you hear “tech stocks,” you likely think of NASDAQ. Home to giants like Apple, Microsoft, and NVIDIA, this exchange has become synonymous with innovation and growth. But for an Indian investor sitting in Mumbai or Bengaluru, understanding what is NASDAQ goes beyond just knowing the ticker symbols. It involves navigating time zones, currency regulations (LRS), and tax efficiency. Whether you are looking to diversify your portfolio with global leaders or simply curious about how this electronic marketplace functions, this guide breaks down the mechanics of the exchange and how you can participate in its growth story.

NASDAQ History

Before it became the digital home of Silicon Valley, the stock market was a physical place where traders shouted orders on a floor. That changed in 1971.

The Origins (1971):
NASDAQ stands for the National Association of Securities Dealers Automated Quotations. It was founded by the National Association of Securities Dealers (NASD), now known as FINRA. On February 8, 1971, it launched as the world’s first electronic stock market. Unlike the New York Stock Exchange (NYSE), which relied on a noisy trading floor, NASDAQ used a computer bulletin board system to display prices.

Evolution to an Exchange:
Initially, it was merely a quotation system and didn’t execute trades. By the 1990s, during the dot-com boom, it became the preferred venue for technology companies. In 2006, it officially separated from the NASD to become a licensed national securities exchange. Today, it is the second-largest exchange in the world by market capitalization, trailing only the NYSE, but often surpassing it in trading volume.

How does NASDAQ work?

To understand what is NASDAQ, you must distinguish between an “auction market” and a “dealer market.”

Dealer Market vs. Auction Market

• NYSE (Auction Market): Buyers and sellers trade directly with each other. A specialist (Designated Market Maker) matches these bids and asks on a physical floor (or electronically).
• NASDAQ (Dealer Market): There is no physical trading floor. Instead, market participants trade through dealers (known as Market Makers). These dealers hold an inventory of stocks and are ready to buy or sell at quoted prices.

The Role of Market Makers

On NASDAQ, multiple market makers compete for your order. For every stock, like Tesla or Alphabet, there are several dealers posting two prices:

1. Bid: The price they are willing to pay to buy the stock from you.
2. Ask: The price at which they are willing to sell the stock to you.

The difference between these two is the “spread,” which is the dealer’s profit. This competition ensures liquidity and keeps spreads tight, allowing you to enter and exit positions efficiently.

A Tech Behemoth

While the NYSE is known for “old economy” blue-chip industrials (like Coca-Cola or Walmart), NASDAQ is the undisputed king of the “new economy.” It hosts the companies that define modern life.

The “Magnificent Seven” Influence:
As of November 2025, the exchange is dominated by technology and consumer discretionary sectors. Companies like Apple, Microsoft, Amazon, NVIDIA, Meta (Facebook), Alphabet (Google), and Tesla call this exchange home. These stocks don’t just move the NASDAQ; they often dictate the sentiment of global markets, including India’s Nifty IT index.

Why Tech Loves It:
The electronic nature of the exchange and its lower listing fees (compared to NYSE) historically attracted growth companies. Even today, biotech, software, and semiconductor firms overwhelmingly choose to list here.

The inner workings of NASDAQ

Not all companies on the exchange are treated equally. To maintain quality and investor trust, the exchange is divided into three distinct market tiers based on financial strength and liquidity.

1. The Nasdaq Global Select Market

This is the most exclusive tier with the highest listing standards. It includes the massive tech giants and large-cap international companies. Think of this as the “Ivy League” of the exchange. Indian ADRs like Infosys and HDFC Bank (listed on NYSE) would meet these stringent criteria if they chose this venue.

2. The Nasdaq Global Market

This tier consists of mid-cap companies. These are established firms with global operations but may not yet meet the massive financial requirements of the Select Market. It offers a balance of visibility and strict regulation.

3. The Nasdaq Capital Market

Previously known as the “SmallCap Market,” this tier is for early-stage companies with lower market capitalization. It serves as an incubator for growth companies. Listing requirements here are less stringent, allowing smaller firms to raise capital and grow before graduating to higher tiers.

How to list scrips on Nasdaq?

For a company to list its “scrips” (shares) on the exchange, it must meet rigorous financial, liquidity, and corporate governance standards. These include minimum pre-tax earnings, cash flow, and a minimum bid price (usually $4).

The Route for Indian Companies

As of November 2025, Indian companies cannot directly list their equity shares on foreign exchanges like NASDAQ or NYSE. Instead, they use American Depositary Receipts (ADRs).

How ADRs Work:

1. Deposit: The Indian company deposits its shares with a domestic custodian bank.
2. Issue: A US depository bank (like JP Morgan or Citibank) issues receipts (ADRs) against these shares.
3. Trade: These ADRs trade on NASDAQ just like regular US stocks.

Notable Indian ADRs:
While many Indian giants like HDFC Bank and ICICI Bank are listed on the NYSE, companies like MakeMyTrip (technically Mauritius-incorporated but India-centric) and Sify Technologies trade on NASDAQ.

The GIFT City Exception:
Recent regulations allow Indian companies to list on the International Financial Services Centre (IFSC) in GIFT City, Gujarat. While this is not a direct NASDAQ listing, it is a step towards global capital access.

What is the Nasdaq Composite Index, and how to invest in it?

New investors often confuse the exchange with the index. Here is the difference:

Nasdaq Composite Index (^IXIC)

• Composition: Includes almost all stocks listed on the exchange (over 3,000 companies).
• Focus: It is a broad measure of the entire exchange’s performance.
• Investing: You cannot invest directly in the index, but you can buy index funds that track it (though these are rare in India compared to Nasdaq 100 funds).

Nasdaq 100 Index (NDX)

• Composition: Includes the 100 largest non-financial companies listed on the exchange.
• Focus: This is the benchmark for big tech. It excludes banks and financial firms, making it a pure-play on growth and innovation.
• Investing: This is the most popular route for Indian investors. ETFs like the Invesco QQQ (in the US) or Motilal Oswal Nasdaq 100 ETF (in India) track this index.

How to invest in Nasdaq from India?

In FY 2025-26, Indian investors have three primary routes to own a piece of the US market. Each has different tax and regulatory implications.

Method 1: Direct Investment via LRS

You can open a US brokerage account through platforms (like Vested, INDmoney, or your bank’s overseas tie-up) and buy stocks directly.

• Regulation: Under the Liberalised Remittance Scheme (LRS), you can remit up to $250,000 (approx. ₹2.1 crore) per financial year.
• TCS Rules (Budget 2025):
  • Remittance up to ₹10 lakh: Nil TCS.
  • Remittance above ₹10 lakh: 20% TCS (Tax Collected at Source). This is not an extra cost but an advance tax you can claim back in your ITR.
• Pros: You own the actual stock/ETF. No expense ratio from Indian fund house.
• Cons: High wire transfer fees; currency conversion costs.

Method 2: Indian Mutual Funds & ETFs

You can buy rupee-denominated Mutual Funds or ETFs listed on NSE/BSE that invest in US stocks.

• Examples: Motilal Oswal Nasdaq 100 ETF or Kotak Nasdaq 100 Fund of Fund.
• Status Check (Nov 2025): SEBI has an industry-wide limit on overseas investments ($7 billion). While existing ETFs trade on the exchange, fresh lumpsum inflows into Fund of Funds (FoFs) are occasionally paused when the limit is breached. Always check the current subscription status with the AMC.
• Pros: Easy to buy via your standard demat account; no LRS paperwork.
• Cons: Expense ratios can be higher; tracking error due to currency/market timing.

Method 3: NSE IFSC (GIFT City)

This is the newest route. You can trade in “unsponsored depository receipts” of top US companies through the NSE International Exchange (NSE IFSC).

• Mechanism: You open a demat account with a broker registered in GIFT City.
• Pros: Lower costs than direct LRS; regulated by IFSCA.
• Cons: Liquidity is still developing compared to direct US markets.

Conclusion

Investing in NASDAQ offers Indian investors a front-row seat to global innovation. Whether you choose the direct LRS route or the convenience of domestic ETFs, the key is consistency. Remember, while US markets offer dollar diversification, they also come with currency risk and different tax rules. By understanding what is NASDAQ and how it functions, you can build a robust, geographically diversified portfolio that isn’t solely dependent on the Indian economy.

Ready to diversify globally? Open your PL Capital account and explore international ETFs today.

FAQ’s on NASDAQ

1. What are NASDAQ Trading Hours?

As of November 2025 (Standard Time), the trading hours are 9:30 AM to 4:00 PM Eastern Time. For Indian investors, this converts to 8:00 PM to 2:30 AM IST. Pre-market and after-hours trading sessions exist but carry higher volatility risks.

2. What is the difference between NSE and NASDAQ?

NSE is an order-driven auction market where buyers/sellers match directly. NASDAQ is a quote-driven dealer market where market makers provide liquidity. Additionally, NSE lists Indian companies, while NASDAQ is a US exchange hosting global tech giants.

3. What is NASDAQ 100?

The Nasdaq 100 is an index comprising the 100 largest non-financial companies listed on the exchange. It is a modified market-capitalization-weighted index and is the primary benchmark for investors seeking exposure to the technology, biotech, and consumer sectors.

4. What type of companies do you find in NASDAQ?

You primarily find growth-oriented companies in technology (Apple, Microsoft), consumer services (Amazon, Starbucks), and biotechnology (Moderna, Gilead). Unlike the NYSE, it has very few financial institutions or heavy industrial firms.

5. How are US stocks taxed for Indian investors?

For AY 2026-27, Long-Term Capital Gains (LTCG) (held > 24 months) are taxed at 12.5%. Short-Term Capital Gains (STCG) are taxed at your applicable income tax slab. Dividends are taxed at your slab rate, plus a 25% tax withheld in the US (claimable as credit).