Many Indians invest in international markets such as the United States and China through mutual funds (MF) in order to diversify their portfolios. Strong market rises and appreciation of foreign currencies are other factors contributing to the increase in flows into the niche category, a trend that has accelerated over the past two years.
Most large asset management companies offer mutual funds that invest in stocks listed abroad, including through structures of funds of funds (FoFs), exchange-traded funds (ETFs). Investing in foreign companies like Amazon and Alibaba through mutual funds is proving cheaper than buying their shares directly for Indian investors.
RBI data released last week showed that investment by Indian mutual funds in foreign stocks rose more than three and a half times in FY21, from Rs 5,808 crore at Rs 5,808 crore at the end of March 2020. The launch of several new funds this year should give an additional boost.
A combination of factors, including new market entrants, has led Indians to explore options for investing outside of India over the past year and a half, according to Niranjan Avasthi, head of product marketing and operations. digital at Edelweiss Mutual Fund. “Overall, the investment has taken off. People also realized that there were good opportunities to invest outside of India… it could be due to fund returns, awareness campaigns, ”Avasthi said.
According to Ashwin Patni, head of products and alternatives at Axis Mutual Fund, although there is a bias to the domestic market, the share of allocation to international funds will increase to around 10% in five years. “We (investors) have a better understanding of the opportunities the Indian market presents, so we will always prefer to have a large allocation in the domestic market. There was hardly any allocation to global markets, so from there it will grow to a larger number, eventually 15-20% of the capital will go to non-national markets, ”Patni said.