Why International Funds Are No Longer Optional

Diversification beyond borders is no longer just a fashionable idea for Indian investors. It is increasingly becoming a sensible risk-management strategy. When geopolitical tensions in West Asia pushed crude oil prices higher, India felt the impact almost immediately because the country imports nearly 85 per cent of its oil requirement. A sharp rise in crude does not remain confined to the energy basket alone. It quickly feeds into inflation, shapes interest rate expectations, pressures corporate margins, and eventually weighs on equity valuations.[EasyDNNnews:PaidContentStart]

This is precisely why Indian investors need to think beyond a purely domestic approach. Over the last few quarters, global markets have also been driven by themes such as artificial intelligence. While these trends have created significant opportunities overseas, India has relatively few listed companies with meaningful exposure to such themes. That has been one of the factors behind the relative underperformance of Indian equities during certain phases.

Against this backdrop, international Mutual Funds merit closer attention. They allow investors to participate in different currencies, sectors, and economic cycles, thereby reducing dependence on a single-country macro story. The recent return profile of international Equity Funds also strengthens the argument. The category has delivered 7.36 per cent, making it one of the best-performing segments within the equity fund space. In fact, among equity fund categories, only a handful have delivered positive returns, and international funds have stood out among them.

In our special report in this issue, we have examined in detail why international funds can work in a portfolio, how they are Taxed, and the different types of options available within the category.

For Indian retail investors, the message is simple, keep the core portfolio domestic, but consider allocating 10 per cent to 20 per cent of the equity portion to overseas markets such as the U.S., Europe, and other developed or emerging economies. International funds are best suited for long-term goals, ideally those that are at least five years away.

Shashikant Singh
Executive Editor

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