HOW TO INVEST OVERSEAS NOW

With AMCs restricting investments in international funds, here are your options now

- Omkar Vasudev Bhat & Ravi Banagere

Up until recently, Indians largely restricted themselves to investing in domestic markets and only the enthusiasts saw the scope and opportunity to invest overseas. With the global markets, led by the US, surging during the post-pandemic recovery, investors were attracted to them, both for returns and diversification benefits. During this period, certain domestic mutual funds, led by Parag Parikh Flexi Cap Fund, that maintained a steady international exposure provided superior returns. This also helped arouse interest in the Indian investor about overseas investing. Finally, with the advent of fintech firms that facilitate overseas investing, it became easier for investors to access the foreign markets.

For many, the most convenient route for investing overseas is international mutual funds. These funds, domiciled in India, provide a convenient gateway to foreign stocks, along with the other advantages of mutual funds, viz., professional expertise, instant diversification, and ease of operation. These funds help investors to gain exposure not just to US equities but also to other geographies, such as Japan, Europe, China, etc. However, in consultation with the RBI, SEBI has defined some limits for these funds, both at the fund and industry level, which first came into effect in 2007. These limits have largely been sufficient for more than a decade and a half, with minor increments made by the regulators a couple of times during the period. However, due to the rising popularity of international investing, funds investing directly in foreign stocks have hit their upper limits at the industry level and now it's not possible for investors to invest in them since the start of this year. The industry body AMFI is trying to get the limits enhanced but the regulators seem to be dragging their feet.

Only time will tell if and when the limits are increased. How to invest overseas till then? Here are your options.