India is lagging global markets. Time to invest overseas?

Summary: Your India portfolio may not be enough anymore. But stepping into international markets isn’t as straightforward as it looks. We show you the practical routes available to choose without tripping over RBI caps, taxes and hidden costs. 

When Wall Street, Europe and even parts of Asia have notched double-digit gains in the past year, the Sensex and Nifty have gone largely nowhere.

The underperformance is due to a mix of reasons. Valuations in India have been running hot, leaving little room for upside. Corporate earnings, though steady, haven’t delivered the kind of surprises that fire up rallies. And foreign investors, tempted by higher interest rates in the US and brighter prospects elsewhere, have been net sellers.

The India story is still intact

This lull doesn’t negate the India story. The long-term drivers remain firmly in place: young demographics, rising consumption and a digital economy gathering speed. But even the strongest narratives take breathers. This is when it helps to remember that betting only on one market, one currency and one regulatory regime increases concentration risk.

India makes up just 4.2 per cent of the world’s market capitalisation. So if you only invest here, you’re missing 96 per cent of what the world has to offer—leading technology giants, chipmakers and manufacturers, unavailable locally.

Diversifying abroad, thus, can help you strengthen your overall portfolio so that your wealth isn’t hostage to the rhythms of a single market.

At Value Research, we recommend allocating not more than 30 per cent of your equity portfolio to international markets, tailored to your goals and horizon.

How can you invest overseas?

While there are ways for Indian investors to add global equities, none of them are free of restrictions. The RBI allows the entire mutual fund industry to invest up to $7 billion overseas, with each fund house limited to $1 billion. ETFs face their own ceilings—$1 billion across the industry and $300 million per fund. These limits continue to force asset managers to slam on the brakes on fresh inflows across the industry.

Still, some options are available. Below are the routes through which you can get global exposure, along with their caveats.

1. International funds

These are dedicated Indian mutual funds that only invest in global equities. You can easily invest in them through SIPs. But availability is patchy. Due to the RBI limits, not all schemes are accepting fresh investments. Even those can close at short notice if certain limits are hit.

2. Indian-listed global ETFs

These ETFs track global indices like the Nasdaq 100, Hang Seng, etc., and trade on Indian exchanges. You can buy and sell them just like any stock. When their upper investment limit is breached, you can only buy existing units in the market. But it’s crucial to remember that they often trade at steep premiums to their net asset value (NAVs), making it hard to mirror underlying index returns.

3. Direct investing via LRS

You can buy global stocks or ETFs directly through the Liberalised Remittance Scheme (LRS), which allows investors to remit up to $250,000 abroad each year to invest. While this route offers complete freedom to buy what you want, the process is cumbersome and investors have to bear forex costs, platform fees and pay tax collected at source.

4. Indian funds with overseas exposure

Some domestic hybrid or flexi-cap funds hold a slice of global equities. This is the easiest option for beginners. In this case, the fund manager decides how much global exposure you actually get.

So, should you look overseas? The answer is yes. Think of it as adding a second engine to your wealth machine. When Indian markets stall, global markets can keep your portfolio moving.

Which international funds deserve to be in your portfolio?

The challenge with international investing isn’t just access but also picking the right funds and knowing when they’re open. That’s where we step in. Our analysts at Value Research Fund Advisor have already done the hard work and identified six international funds that deserve a place in long-term portfolios.

You’ll find them on the Fund Advisor buy list—curated, updated routinely and backed by our in-depth research.

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Also watch: Do You Really Need an International Fund in Your Portfolio?