Hi,
I am a new member here. I have been searching for an answer to this question for many months. As for as my knowledge gathered in this quest, both tradeprivate and traderwizard are right in a way.
We are allowed to transfer abroad 200,000 USD in a year for any purpose including investment. But there is a small clause in the RBI doc i had seen and it said some thing like "for any purpuse but not speculation" !!!. So there is an apparent confusion in the wording. We don't have a clear demarcation between investment and speculation. investment also is a kind of speculation but may be the bets are for long term !. This statement can be contested, of course.
So, we Indian residents can open forex accounts from retailers, but the transferred money can be questioned on grounds of speculative purposes. In my quest to clarify this, i came across many people who were actually trading with varying levels of success. But not even one is not absolutely clear of the legality. Many say, "We are using just couple of thousand dollars or a little more and we don't transfer huge sums, so its pretty small offense if at all its an offense".
If any body has clear answer to this question, please post here.