One-year returns delivered by a significant number of overseas funds have been impressive. The top two funds have delivered a return of about 43-47 per cent over one year as on Thursday, according to Value Research data, while six funds have given a yield ranging 32.62-38.17 per cent. Two other funds in the top-10 list had given a return of about 28 per cent during the same period.
Compared to this, the return of top 10 large-cap domestic equity funds ranged 7.96-12.01 per cent. .
Yet to warm up
Still it is surprising that Indian mutual fund investors are yet to warm up to the idea of investing in international mutual fund schemes offered by Indian fund houses. The advantages of investing in overseas funds are many. The chance of owning shares of global blue-chips, such as Microsoft, Google, GE, Facebook and Apple is not something to be missed by Indian investors.
That the weakening of the Indian currency against the US dollar will always give the investments an edge is something they should give a thought to, apart from the fact that they are paying in Indian currency for their investment. A hot economy like China too, offers immense growth opportunities. This also helps investors to diversify their risk as they would have realised by investing in Indian equity or MFs that have lagged their global peers in recent months.
However, Indian mutual funds have been able to mop up only a paltry sum from the domestic investors for their international offerings. In fact, only a handful of schemes out of about 70 international funds have assets in crores. Many schemes have been unable to mop up even Rs 1 crore as at the end of June quarter this year.
P. Phani Sekhar (Fund Manager-PMS), Angel Broking, said while the Indian rupee had depreciated by 14.74 per cent in the last one year, gains have been made by investing in global markets. He said while the Dow Jones index had given a return of 16.68 per cent in one year, Nasdaq had given 22.71 per cent, Nikkei of Japan a whopping 67.61 per cent and FTSE of England 18.4 per cent.
Joy unlikely to last
Phani Sekhar said many of these markets rallied from oversold levels. “While the growth outlook was indeed better in the US and Europe compared to last year, valuations are ahead of fundamentals,” he cautioned, adding that while the rupee might depreciate this year too, “world markets may not provide the joy unlike last year”.
On why Indian investors have not warmed up to global investments, Phani Sekhar said these funds were new to India and “it is a sheer coincidence” that in the initial years, they had given good returns. As they had outperformed by a huge margin, it was possible that the AUM of many of them may go up in the near future.
“But he felt that “from a long-term perspective, investing in international funds is more suitable from a diversification than an outperformance objective”.
On whether investing in the US markets or Asian markets was better, he said this depended on the investment objective. He said if “diversification is the motive, US markets are better, while Asia can be the preferred choice if growth is the objective.”