India's mutual funds face overseas investment limitations

Many investors are looking to global stocks as domestic markets experience volatility. Currently, around 20 mutual fund schemes in India are offering options that include investments in international equities. The Edelweiss Technology Fund has the highest exposure to overseas equities at about 30%. Other funds like the Axis Innovation Fund and DSP Healthcare Fund also feature significant investments in global stocks, with figures ranging from 10% to nearly 18%. Since the $7 billion cap on overseas investments was surpassed in 2022, new funds are unable to invest fresh cash in global markets. This limitation means only a few older funds still have overseas equity exposure. Some of the other active funds include the Axis Growth Opportunities Fund and the Franklin India Technology Fund. Experts suggest that investing in these domestic funds with global exposure can help investors manage risks. They provide a way to benefit from international market trends while minimizing exposure to volatility. According to Himanshu Srivastava from Morningstar India, global diversification can enhance a portfolio by balancing risks. There are also dedicated global investment funds available, but some experts advise caution. Shwetha Rajani from Anand Rathi cautions against investing in global funds right now, citing recent performances driven by market liquidity rather than solid fundamentals. She recommends a conservative approach, suggesting that investors consider only a small portion of their portfolio for global exposure and find opportunities in various domestic equity funds for better returns.