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Retail investors have several ways to spread their investments, including international mutual funds, blended funds with global and local stocks, and international ETFs.
SEBI allows new investments in global mutual funds only to match recent redemptions.
Investing in global markets is a good way to spread your money across different places, but Indian investors are facing some problems. Due to the rules set by the Reserve Bank of India (RBI), many international mutual funds in India are not taking new investments right now.
In February 2022, the RBI capped the total overseas investment by the mutual fund industry at $7 billion. When this limit was hit, the Securities and Exchange Board of India (SEBI) asked asset management companies (AMCs) to stop fresh inflows.
Although SEBI later allowed investments to offset redemptions, there are still tight restrictions. Each AMC has a specific cap based on how much it had invested overseas when the limit was reached. If redemptions occur, the AMC can accept new investments only up to that reduced amount.
Currently, there are 61 international mutual fund schemes, as per Mint, but a majority are closed to new lump sum and SIP investments. Funds that invest heavily in the US have particularly high demand, so their investment limits were quickly reached.
How You Can Invest in International Markets: Details Here
One option for investors is to go for hybrid or combo funds that invest in both Indian and international stocks. For example, the Parag Parikh Flexi Cap Fund and DSP Value Fund offer such exposure. These funds help maintain some level of global diversification while staying within regulatory limits.
Tax treatment also varies. If a fund holds 65 per cent or more in Indian equities, it is taxed at 20 per cent if sold within a year and 12.5 per cent if sold after. Pure international funds are taxed differently—slab rates apply if sold within 24 months, and a 12.5 per cent rate applies afterwards.
International ETFs are another route. These are traded on exchanges but may trade at a premium to their actual value, especially when demand is high and fresh investments are restricted. Investors need to be cautious of overpaying for such ETFs.
Alternatively, individuals can invest directly in global markets using the RBI’s Liberalized Remittance Scheme (LRS), which allows up to $250,000 per year. However, this method comes with high costs, currency conversion charges, and complex tax rules.
A newer and simpler option is investing via Gift City, where funds like the one recently launched by DSP allow retail investors to put money in global stocks with fewer tax and brokerage complications. This may become a preferred option until the RBI relaxes the current cap on overseas mutual fund investments.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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