With $7-billion limit breached, only a few MF schemes offer overseas equity exposure; here's the list of schemes

Global diversification, he says, adds another layer to a portfolio, offering investors an additional way to spread risk.

At a time when there is increased volatility in domestic equities and a section of investor community is looking at global stocks for diversifying their risks, nearly two dozen mutual fund schemes are offering investors a combination of such an exposure with a single investment every month.

Data shows there are around 22 domestic schemes that have invested a part of their funds in global stocks apart from their exposure in domestic equities.k with its overseas equities' exposure pegged at nearly 30 percent – 29.43 percent to be precise. It is followed by DSP Value Fund at 27 percent and Axis Innovation Fund, which has an exposure of nearly 18 percent to global stocks.

DSP Healthcare Fund, DSP Multi Asset Fund, SBI Technology Opportunities Fund, SBI Focused Equity Fund, Parag Parikh Flexi Cap Fund, DSP Value Fund and Templeton India Equity Income Fund are some of the other mutual fund schemes whose global equities exposure is in double digits -- ranging from 10 percent to 16 percent.

This assumes significance as the limit for such overseas investment of mutual funds is capped at $7 billion at an industry level, which was breached in 2022. More importantly, the limit has not been raised since then, limiting the asset management companies’ ability to make fresh investments.

Hence, there are only a handful of old schemes with an exposure to global stocks. Newer schemes and even New Fund Offers (NFOs) – even with a clause allowing them to invest in overseas equities – are unable to invest in global stocks.

Some of the other schemes that have invested a part of their funds in global equities include Axis Growth Opportunities Fund, Aditya Birla SL Dividend Yield Fund, SBI Flexicap Fund, Franklin India Technology Fund, ICICI Prudential Innovation Fund, Kotak Technology Fund, and SBI ESG Exclusionary Strategy Fund among others.

Experts believe that instead of investing directly in international funds, these domestic funds with global exposure provide a more balanced approach. They allow investors to benefit from global trends while remaining shielded from extreme international market volatility.

Morningstar India's Himanshu Srivastava says that from an investment and diversification perspective, having global exposure in a portfolio is “not a bad position" to be in. Global diversification, he says, adds another layer to a portfolio, offering investors an additional way to spread risk.

“Global investing is valuable because markets perform differently at different times—when India is underperforming, other markets may be doing well, and vice versa. This diversification helps mitigate risks," he says.

Incidentally, there are a few dedicated global investment schemes as well that are accepting investments. These include, Aditya Birla SL Global Emerging Opportunities Fund, Axis Global Equity Alpha Fund of Fund, Edelweiss Greater China Equity Off-Shore Fund, HSBC Global Emerging Markets Fund, Invesco India - Invesco Global Equity Income FoF, Mahindra Manulife Asia Pacific REITs FoF, Mirae Asset S&P 500 Top 50 ETF FoF and PGIM India Global Equity Opportunities Fund among others.

On overseas funds, Shweta Rajani, Head - Mutual Funds at Anand Rathi Wealth says that it is not recommended to invest in such funds, particularly based on the recent rally, as the recent rally in global funds like China-based ETFs and Nasdaq funds has largely been driven by liquidity rather than any significant structural improvements in fundamentals.

Additionally, she says that despite the short-term economic uncertainty, long-term macros look favourable for India.

“Considering all these, we don’t recommend investing in global funds. If one looks for global diversification in the portfolio one can explore only up to 5% of overall portfolio and investors can consider investing across the range of domestic diversified equity funds to get exposure across the range of categories, sectors and to generate good alpha and returns in the long-term," she says.

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