There was a time when global investment advisors were cajoling their clients to invest in emerging markets with a focus on India and China. Now it appears that Indians would be wise to look abroad.
The average Indian equity diversified fund was down by nearly 51% (1-year return*), while the category of Indian mutual funds that invest overseas lost a much less 32% during this period.
Currently, there are 16 open-end funds that invest the bulk of their assets in foreign countries. These include infrastructure funds, commodity funds, funds that invest in gold mining stocks and the funds dedicated to emerging markets. These funds either take direct exposure to foreign equities or invest in foreign mutual funds. The total assets of these funds are Rs 3,076.71 crore (December 31, 2008).
The best fund under this category is DSPBR World Gold Fund that invests in gold mining stocks by purchasing units of Merrill Lynch International Investment Funds - World Gold Fund (MLIIF - WGF). It shed nearly 18%. The worst fund, Principal Global Opportunities that invests in the Principal Emerging Market Fund, fell by 42%. Meanwhile, the fall in the equity diversified fund category was in the range of 31% to 81% (1-year return*).
Even in equity diversified category there are 7 open-ended funds that have a leeway to invest in foreign markets which can go up to 35%. The average fall in these funds was 45% (1-year return*), below the average fall in the equity diversified category of 51%.
Though, the Indian market is amongst the worst hit as it has lost nearly 49% per cent (1-year return*) as against the 39% fall in the MSCI World Index over this period. But the 5-year annualised return of the MSCI World Index is way below at -3.93% as against the Sensex return of 9.96%.
• All returns are as on February 6, 2009