Mutual fund schemes that invest in international markets have delivered the highest average return of 25.79 percent in 2019 across all categories, according to the data by Value Research, a mutual fund research firm.
The domestic mutual fund schemes that invest in overseas markets are termed as international schemes.
Among schemes that registered the best returns in the international category were Edelweiss Greater China Equity Off-shore Fund and Kotak World Gold Fund that delivered 46.64 percent and 45.45 percent average returns, respectively.
Motilal Oswal NASDAQ 100 ETF stood third with 41.63 percent average return in 2019.
Rise in gold prices globally has helped gold funds deliver positive returns. On December 31, US gold futures ended 2019 at $1,523 an ounce, recording an 18.9 percent rise.
Top five best performing international funds also included DSP World Gold Fund (35.85 percent) and ICICI Prudential US Bluechip Equity (35.49 percent).
Mutual fund experts attributed the outperformance of international funds to the strong global market. Apart from that, they also said that rupee depreciation against the dollar had played a major role in the positive returns of these funds.
The decline in the value of the rupee against the dollar in recent weeks has benefitted international funds.
In 2019, the Indian unit dropped by 5 paise to close at 71.36 against the US dollar on the last trading session of 2019 on December 31, leading to a total loss of 159 paise or 2.28 percent in the year amid trade war concerns, a rebound in crude oil prices and higher import bill.
When an investor invests in an international fund, the money is invested in that particular overseas market in dollar-denominated assets.
The change in the price of these assets (foreign equities or bonds) during the period of your investment mainly drives the return of the fund.
But, apart from the performance of the underlying portfolio itself, the movement in the dollar-rupee exchange rate also contributes to the fund’s return.
Financial planners typically advise investors to invest about 10 percent in international funds.
These are mutual fund (MF) schemes launched by fund houses in India which solicit your money here and then invest it abroad.
Advisers are suggesting an investment in international funds as a means to diversify across countries and currencies due to volatility in Indian equities.
Gold funds were second-best performers with 22.66 percent average return due to a rise in gold prices. In India, gold surged 25 percent on MCX in 2019 and closed at Rs 39,100 per 10 gram on Dec 31, 2019.
Geopolitical tension, a month-long trade war between US and China, geopolitical tensions, buying from central banks and an increase in investment demand for gold are some of the main factors that lead to a sharp surge in gold prices in 2019.
In the year gone by, among equity funds, the worst-performing category was small-cap schemes which delivered a negative 1.51 average return. In comparison, the BSE Small Cap Index plunged 6.27 percent during the review period.
Barring small-cap schemes, all schemes categories in equity and debt have delivered positive returns in 2019.
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