Tap into Global Growth Opportunities
Diversify your portfolio beyond India. Discover how Nidhi Capital (ARN-116800) helps you access international equity markets easily through specialized Indian Mutual Funds.
Why Look Beyond Indian Borders?
Investing internationally offers compelling advantages for portfolio diversification and growth.
Geographical Diversification
Reduce dependency on a single economy (India). Different markets perform differently at different times.
Access Global Growth Engines
Invest in leading international companies and sectors (like global Tech giants) not fully represented in India.
Tap into Global Themes
Gain exposure to specific international trends like AI, renewable energy, or consumption patterns in developed/emerging markets.
Currency Diversification
Holding assets in foreign currencies (like USD, EUR) can potentially benefit if the Rupee depreciates (also carries risk).
Different Economic Cycles
Benefit from growth in economies that may be in a different phase of the economic cycle than India.
Potential Risk Reduction
Adding uncorrelated international assets can potentially lower overall portfolio volatility over the long term.
The Hurdles of Direct International Investing
While possible, investing directly in foreign stocks/ETFs presents challenges for Indian investors.
Common Difficulties Include:
- Regulatory Compliance (LRS): Navigating RBI's Liberalised Remittance Scheme rules, limits, and reporting requirements.
- High Costs: Significant currency conversion charges, foreign brokerage fees, and wire transfer costs can eat into returns.
- Minimum Investment Size: Some foreign platforms or stocks may have high minimum investment thresholds.
- Complex Taxation: Dealing with tax laws in both India (on global income) and the foreign country (potential withholding taxes), requiring specialized knowledge.
- Tracking & Research: Difficulty in monitoring global markets, understanding foreign companies, and accessing reliable research across time zones.
- Account Opening Formalities: Opening overseas brokerage accounts can involve extensive documentation and processes.
- Estate Planning: Cross-border inheritance laws can add complexity.
These factors make direct investing cumbersome and potentially expensive for many retail and even HNWI investors.
The Convenient Solution: Indian Mutual Funds
Indian Asset Management Companies (AMCs) offer specialized schemes that invest in overseas markets, providing a simple and accessible route for Indian investors.
How Indian MFs Invest Globally
These funds typically use one of the following structures:
Feeder Funds
Invests primarily in ONE specific overseas fund
An Indian fund scheme collects money from investors here and predominantly invests ('feeds') it into a single, specific master fund domiciled abroad (e.g., a popular US large-cap growth fund).
Simplicity: You track the Indian fund; the AMC handles overseas investment. Performance closely mirrors the underlying foreign fund (minus expenses and currency effects).
Fund of Funds (FoFs) - International
Invests in MULTIPLE overseas funds/ETFs
An Indian fund scheme invests in a portfolio of various international mutual funds or Exchange Traded Funds (ETFs). This offers broader diversification across different managers, regions, or themes within a single Indian fund.
Diversification: Spreads risk across multiple underlying strategies/managers. Fund manager actively selects the underlying foreign funds.
Illustrative Examples of Fund Types
Disclaimer: The funds mentioned below are examples for illustrative purposes ONLY and do not constitute recommendations or endorsements by Nidhi Capital. Fund availability, investment strategies, and suitability can change. Always consult with your advisor before investing.
Types of International Exposure Available:
- US Equity Focused (e.g., Nasdaq 100 / S&P 500 Trackers/Feeders): Funds aiming to capture growth from major US technology and large-cap companies. Often available as Index Fund feeders or FoFs investing in US ETFs.
- Global Diversified Funds (e.g., MSCI World Index Feeders/FoFs): Funds providing broad exposure across developed markets worldwide (US, Europe, Japan, etc.), often through FoFs investing in global index ETFs or actively managed global funds.
- Emerging Markets Focused: Funds targeting growth potential in developing economies (excluding or including India), often investing in specific Emerging Market ETFs or funds.
- Thematic Global Funds (e.g., Global Technology, Healthcare, ESG): Funds focusing on specific global sectors or themes, allowing targeted international exposure.
Nidhi Capital helps identify specific schemes within these categories that align with your investment objectives and risk profile, subject to current availability and regulations.
Key Risks to Consider
International investing brings unique risks beyond standard market volatility.
Currency Risk (Exchange Rate Fluctuation)
Changes in the INR exchange rate against the foreign currency (e.g., USD) directly impact your returns. A strengthening Rupee reduces gains (or increases losses), while a weakening Rupee enhances gains (or cushions losses).
Geopolitical & Country-Specific Risk
Political instability, regulatory changes, economic downturns, or social unrest in the countries where the underlying fund invests can negatively affect performance.
Underlying Fund Performance Risk
Your returns depend heavily on the performance of the actual overseas fund(s) that the Indian scheme invests in.
Higher Expense Ratios
Often involves two layers of fees: the expense ratio of the Indian Feeder/FoF PLUS the expense ratio of the underlying international fund(s), potentially impacting net returns.
Concentration Risk
Funds focused on a single country, region, or theme carry higher concentration risk compared to globally diversified funds.
Regulatory & Tax Environment Changes
Changes in regulations (like LRS limits) or tax laws in India or the foreign country can affect investment feasibility or returns.
Taxation of International Mutual Funds in India
Important Note: Treated as Non-Equity Funds
For Indian income tax purposes, Mutual Funds investing less than 65% in domestic (Indian) equities are generally treated as Non-Equity or Debt Funds, regardless of whether the underlying international assets are equities.
This means the taxation rules are different from domestic equity funds:
- Short-Term Capital Gains (STCG):
- Holding Period: 36 months (3 years) or less.
- Taxation: Gains are added to your total income and taxed at your applicable income tax slab rate.
- Long-Term Capital Gains (LTCG):
- Holding Period: More than 36 months (3 years).
- Taxation: Gains are taxed at 20% after applying the indexation benefit. (Indexation adjusts the purchase cost for inflation, potentially lowering the taxable gain).
Key Implication: The tax treatment (especially LTCG with indexation) can be advantageous compared to STCG on domestic equity if held long-term, but the STCG rate can be high if redeemed within 3 years for those in higher tax brackets.
Disclaimer: Tax laws are subject to change and interpretation. This information is general. Please consult a qualified tax advisor for advice specific to your financial situation.
Who Should Invest in Foreign MFs?
These funds are generally suitable for investors who:
- Seek geographical diversification beyond the Indian market.
- Have a longer investment horizon (ideally 5+ years, especially given the tax treatment).
- Have a higher risk appetite and understand the added risks (currency, geopolitical, etc.).
- Want exposure to specific global themes or leading international companies.
- Are looking to potentially benefit from long-term currency movements (while acknowledging the risk).
- Prefer the convenience of investing through the Indian Mutual Fund route rather than direct overseas investment.
It's usually recommended as a supplementary part of a well-diversified portfolio, not typically as a core holding for beginners.
Aditya, an HNWI investor with a significant Indian equity portfolio, felt over-concentrated. He wanted exposure to US technology growth but found direct investing complex. Nidhi Capital helped him identify a suitable Feeder Fund investing in a Nasdaq-100 ETF. This allowed him to easily add global tech diversification via his existing Indian MF platform, complementing his domestic holdings without the operational hassles of direct LRS investment.
Nidhi Capital's Approach to Global Investing
Helping you navigate international opportunities wisely.
Portfolio Review
Assessing your current asset allocation and need for geographical diversification.
Risk & Suitability
Understanding your tolerance for currency, geopolitical, and other international risks.
Strategy & Fund Selection
Identifying appropriate regions, themes, and specific Feeder/FoF schemes based on research.
Implementation & Monitoring
Facilitating investment and providing ongoing tracking within your overall portfolio context.
International Investing FAQs
Indian Mutual Funds investing overseas are subject to overall industry limits imposed by SEBI and RBI. Sometimes, due to these limits being reached, AMCs may temporarily stop accepting new investments (lumpsum or SIPs) in these schemes. Nidhi Capital stays updated on these limits.
For most investors, the Mutual Fund route (Feeder/FoF) is significantly simpler and more convenient. It avoids LRS paperwork, high transaction costs, currency conversion hassles, and complex foreign tax compliance. Direct investing offers more control over stock selection but comes with higher operational complexity and costs.
The Indian fund's NAV reflects the value of the underlying foreign fund's units (converted to INR using the current exchange rate), plus any other domestic assets/cash held, minus the Indian fund's expenses. It's declared daily based on the previous day's closing value of the international assets.
Minimum investment amounts (both lumpsum and SIP) are set by the individual Indian Mutual Fund schemes and are typically similar to domestic funds (e.g., starting from ₹500 or ₹1000 for SIPs), making it very accessible.
If the foreign currency (e.g., USD) strengthens against the INR, it adds to your returns when converted back. Conversely, if the INR strengthens against the foreign currency, it detracts from your returns. This currency movement is an inherent part of international investing returns (or risk).
Ready to Diversify Globally?
Explore international investment opportunities conveniently through Indian Mutual Funds. Talk to Nidhi Capital.
We help HNWI investors in Thane, Mumbai, and across India navigate the options for global diversification and select appropriate funds based on their portfolio and risk profile.
Discuss International InvestingCall: +91 86559 66975 | Email: contact@nidhicap.com