International Mutual Funds Find Flavour But Lose Favour

Despite stellar performance, these funds are cold-shouldered by investors

International mutual funds have witnessed a sustained investors’ exodus for three consecutive months, despite foreign markets, particularly the US, beating their Indian counterparts by a significant margin since the turn of 2023. Strange as it may seem, let’s understand why international funds are battling against the odds and how you can approach international investing.

Under siege

International mutual funds are struggling against not just one but multiple headwinds. One, these funds are battling against RBI’s permissible overseas remittance. Two, this year’s budget snatched away their indexation benefit, making direct international investing more tax efficient. As a result, investors have yanked out their international fund investments with great intensity. For the first time in five years, the net flows are in the negative for several months. Due to a lack of appeal, even fund houses have held their horses from launching any new international fund, with the last such fund being launched over nine months back.

Overblown reaction?