Global Exposure Without International Mutual Funds: What Indian Investors Can Do

Why Global Diversification Is Becoming Important

Indian investors have increasingly looked beyond domestic equities to diversify portfolios and gain exposure to companies, sectors and economies that may not be adequately represented in India. However, investing through international mutual funds has become difficult as fund houses have faced limits on overseas investments. The situation intensified in 2026, with fresh investments in several international schemes being restricted or suspended. The last major route available through Baroda BNP Paribas Aqua Fund of Fund was also halted for fresh investments in July 2026, highlighting the continuing constraints.

Domestic Mutual Funds Can Offer a Limited Overseas Allocation

One relatively simple alternative is to choose Indian mutual funds that themselves hold foreign securities. These schemes remain rupee-denominated domestic mutual funds, but a portion of their portfolios can be invested overseas. Recent portfolio data shows that several diversified and thematic schemes have meaningful foreign allocations. For example, Parag Parikh Flexi Cap had about 10.6% in foreign equity, while SBI Children's Investment Plan had 12.8%. Some thematic funds had considerably higher overseas exposure.

The important caveat is that these are not substitutes for pure international funds. Most of the portfolio remains invested in India, and the fund should therefore be selected primarily on the basis of its overall investment strategy rather than merely its overseas holdings.

ETFs, Direct Investing and GIFT City Offer Other Routes

Investors who specifically want international exposure have additional avenues, although each involves trade-offs. Overseas ETFs can provide targeted exposure to indices such as the Nasdaq or S&P 500, while direct investing through the Liberalised Remittance Scheme (LRS) allows investors to buy foreign shares and securities. GIFT City has also emerged as another route for accessing global investments, although investors need to examine minimum investment requirements, taxation, liquidity and product structure carefully.

Key alternatives include:

• Domestic mutual funds with overseas holdings: Convenient, but foreign exposure is usually limited.
• International ETFs: More direct exposure, but market-price premiums and liquidity need to be considered.
• Direct overseas investing: Greater flexibility, but involves currency, taxation and compliance considerations.
• GIFT City products: An emerging channel for global investments, with its own structural and tax considerations.

Choose the Route Based on the Role Global Exposure Plays

Global investing should ideally be viewed as a portfolio-diversification tool, rather than a strategy for chasing whichever foreign market has recently performed well. Investors should consider their existing Indian equity allocation, investment horizon, risk tolerance, currency exposure and tax position before deciding how much to allocate overseas. Recent analysis also shows that global exposure through domestic funds can be useful precisely because it adds an international component without requiring investors to completely shift away from Indian equity markets.

For most investors, the practical approach is to first determine how much international exposure is actually required, and then choose the simplest suitable route. A domestic fund with a foreign allocation may work for investors who want modest diversification, while ETFs, direct overseas investments or GIFT City products may be more appropriate for those seeking a deliberate and larger global allocation.