The thing which is not allowed is margin trading in offshore market..so you can put 100k USD and trade or invest with that 100k leverage only but if there is no additional leverage or margin it is not logical to say it trading at all
If you open an account for yourself you have to send money abroad and banks will ask you a million questions apart from ripping you off in exchange rate
There is no law in India which prevent you from trading a foreign market if it is not your money..so lets assume I am a good trader and a foreign trading firm want to hire me to trade with their capital then nothing illegal and nothing illogical.. I will trade and if I make money that money is paid to my bank account in India and I pay tax on that so what is wrong ?
There are many Prop trading firms operating from India most popular Capstone Securities and Futures First and they do trading only with margin..but there is business model to get things done without violating any law of India
We as a trader should be more focused on trading and making money for ourselves...Govt. does not want us to trade foreign market because they need our presence in NSE, BSE and MCX to fulfill their own sinister agendas... but a trader survive only with his trading income and nobody help him when he fails as a trader so lets not get into much legal stuff as we are traders not lawyers
You can ask me any specific questions you have