Mutual funds have started hard-selling schemes that invest in overseas markets, with the recent sharp fall in global equity markets providing the much needed head-room to play within the $7-billion limit prescribed by RBI.
Besides the existing schemes, Mirae Asset Mutual Fund has launched two new offers on Global Electric and autonomous vehicle ETFs Fund of Funds and Global X Artificial Intelligence and Technology ETF FoF.
Nippon India, one of the largest in global investing, has also restarted subscription in its existing schemes.
Investors’ appetite for investing abroad was boosted by the urge to average their cost, after the steady hike in interest rates by the US Fed.
Kavitha Krishnan, Senior Analyst, Morningstar India, said the recent correction across markets has provided mutual funds enough opportunity to open up investment in these schemes.
RBI is yet to consider the stakeholders’ demand to increase the upper limit of overseas investment, she said.
Investors get the option to gain exposure towards FAANG stocks, which are global companies with the largest market cap. Increased investor awareness has led to a spurt in demand for investing in foreign securities, she said.
US market meltdown
Key indices in the US have taken a beating since January, with the S&P 500 index losing 21 per cent, the tech-heavy Nasdaq tumbling nearly 30 per cent, and the Dow Jones declining nearly 15 per cent so far this year.
Following this, the assets of FoF investing overseas has fallen four per cent to Rs 21,176 crore from Rs 22,128 crore in January despite sharp rupee depreciation, according to the Association of Mutual Funds in India data.
Concerned over the rupee’s relentless fall against the dollar, AMFI capped individual mutual funds’ overseas investment limit as of February. RBI has fixed $7 billion as the investment limit for mutual funds in foreign stocks and another $1 billion through ETFs.
After the meltdown in global markets, capital market regulator SEBI allowed mutual funds to invest in foreign stocks within the mandated limit in June.
Arun Kumar, Head of Research, FundsIndia, said the restriction has definitely led to fewer global choices for investors, though the cap for FoFs investing in Global ETFs is still intact.
Global diversification in equity portfolios, should be viewed more from a risk diversification perspective and not necessarily as a return enhancer. Rather than being tactical, it is better to build long-term exposures in global equities for the core equity portion., he added.