There are many Mutual Funds in India, which primarily invest in International Markets (US, China, Global stocks etc.). These funds provide great diversification for Indians to invest in other countries stock markets.
Along with diversification to other countries these funds also provide benefits against Rupee depreciation as most of the underlying investments happens through USD.
Types of International Mutual Funds
Direct International Funds: These funds invest directly in foreign stocks, bonds, or other financial instruments.
Feeder Funds: These are domestic funds that invest in an existing international mutual fund, often managed by a global asset management company.
Regional or Country-Specific Funds: These focus on a particular country or region, such as U.S.-centric funds or Asia-Pacific funds.
Global Sector Funds: These funds focus on specific sectors like technology, healthcare, or energy on a global scale.
Key Features and Benefits of International Mutual Funds
Geographic Diversification: By investing in international markets, investors can diversify their portfolio geographically, which reduces dependence on the Indian economy or stock market. Indian investors can tap into growth stories from developed economies (like the U.S. and Europe) or emerging markets (like China, Brazil) that offer investment opportunities unavailable in India.
Currency Appreciation: Since these funds involve investment in foreign currencies, they provide an opportunity to benefit from the appreciation of global currencies like the U.S. Dollar, Euro, or Yen against the Indian Rupee.
Sector and Industry Exposure: International mutual funds allow investors to access industries and sectors that are either underrepresented or unavailable in India, such as advanced technology, electric vehicles, biotechnology, and global retail chains.
Hedging Against Domestic Market Volatility: These funds can act as a buffer during times of economic slowdown or poor market performance in India, as global markets may perform differently.
Higher Returns Potential: With access to faster-growing sectors in the global economy, international mutual funds may offer better returns compared to domestic-only funds, especially in areas where global companies lead innovation (e.g., technology, artificial intelligence, etc.).
Risks and Challenges
Currency Risk: Currency fluctuation is one of the major risks associated with international funds. A falling foreign currency (relative to the Indian Rupee) may erode returns despite market gains in the foreign country.
Political and Economic Risks: International investments expose the investor to risks arising from political instability, economic downturns, or regulatory changes in the foreign countries where the fund has investments.
Higher Expense Ratios: International mutual funds typically have higher expense ratios due to the cost involved in foreign transactions, regulatory compliance, and management of overseas portfolios.
Time-Zone and Market Knowledge Gaps: International investments may be difficult to track regularly, especially when markets operate in different time zones. Additionally, investors may lack detailed knowledge about the global markets and companies.
Popular International Mutual Funds in India
Several fund houses in India offer international mutual funds, often in collaboration with global asset management companies. Some of the popular funds include:
- Motilal Oswal Nasdaq 100 Fund of Fund: Provides exposure to the U.S. technology sector by investing in the Nasdaq 100 Index, which includes companies like Apple, Microsoft, and Amazon.
- Franklin India Feeder Franklin U.S. Opportunities Fund: A feeder fund that invests in the Franklin U.S. Opportunities Fund, giving access to high-growth U.S. companies.
- Edelweiss Greater China Equity Off-shore Fund: A feeder fund that invests in JPMorgan Funds – Greater China Fund, offering exposure to China and other neighboring countries.
- PGIM India Global Equity Opportunities Fund: Focuses on global equity opportunities with exposure to companies across developed and emerging markets.
India Investment Corner 