MFs open up investment in overseas schemes

Mutual funds have launched hard-selling schemes investing in overseas markets, with the recent sharp fall in global equity markets providing much-needed head-room to play within the $7 billion limit set by the RBI .

In addition to the existing schemes, Mirae Asset Mutual Fund has launched two new offers on Global Electric and Autonomous Vehicles ETF Fund of Funds and Global X Artificial Intelligence and Technology ETF FOF.

Edelweiss Mutual Fund has launched a one of its kind Gold and Silver ETF FOF, which will primarily invest in ETFs overseas. Nippon India, one of the largest companies in global investment, has also resumed membership in its existing schemes.

After the US Fed continued to hike interest rates, investors’ appetite for investing overseas was fueled by an urge to average out their costs.

Kavita Krishnan, Senior Analyst, Morningstar India, said the recent slump in the markets has provided ample opportunities for mutual funds to open investments in these schemes.

He said that the RBI has not yet considered the stakeholders’ demand for raising the foreign investment cap.

Investors have the option to gain exposure to FAANG shares, which are global companies with the largest market cap. He said that increasing investor awareness has led to an increase in the demand for investment in foreign securities.

US market downturn

Major indices in the US have declined since January, the S&P 500 index is down 21 per cent, the tech-heavy Nasdaq is down nearly 30 per cent, and the Dow Jones is down about 15 per cent so far this year. I have come

Subsequently, the assets of FOFs investing abroad fell four per cent to Rs 21,176 crore from Rs 22,128 crore in January, according to data from the Association of Mutual Funds in India.

Worried over the continued depreciation of the rupee against the dollar, AMFI capped the foreign investment limit of individual mutual funds till February. RBI has set $7 billion as investment limit for mutual funds in foreign stocks and another $1 billion through ETFs.

Following a slowdown in global markets, capital markets regulator SEBI in June allowed mutual funds to invest in foreign stocks within a mandatory limit.

Arun Kumar, Head of Research, FundsIndia, said the ban has certainly led to less global options for investors, although the limit of FoF that can invest in global ETFs remains the same.

Global diversification in equity portfolios should be viewed more from the perspective of risk diversification and not necessarily as a return enhancer. Instead of being strategic, it is better to build long-term exposure to the core equity share in global equity, he added.

Published on

27 August 2022


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