However, Indian investors looking to increase overseas exposure are facing challenges as several fund houses have restricted fresh inflows into international schemes after hitting regulatory overseas investment limits which has raised questions about whether investors should continue SIPs, wait for restrictions to ease, or explore alternative routes for global diversification.
Market experts caution investors against making fresh allocation decisions in international funds and continue with existing SIPs.
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Pallav Agarwal, Certified Financial Planner at Bhava Services LLP, told ETMutualFunds investors whose SIPs are already running and continue to be accepted by fund houses need not stop them. However, he advises against starting fresh SIPs or making lump-sum investments in international funds at present because many AMCs have paused new subscriptions due to regulatory limits. He adds that investors should focus on their long-term strategy rather than chasing recent returns, noting that part of the strong performance was also supported by rupee depreciation, which may not continue indefinitely.
Another expert, Shivam Pathak, CFP and Founder of Asset Elixir analysed the performance and told ETMutualFunds that investors should continue SIPs if international exposure is part of their long-term asset allocation and global funds provide geographical diversification, and investment decisions should be driven by portfolio objectives rather than recent performance.
A data analysis showed that in the short term horizon, the international funds have topped the return chart. These funds delivered the highest average return in the last three months, six months, one year and in the current calendar year so far. In the last three months, international funds delivered an average return of 13.53%; in the last six months, these funds gave an average return of 22.36%. International funds delivered an average return of 47.43% in the last one year and 19.76% in the current calendar year so far.
Worry about overseas investment limits and reconsider global mutual funds?
The overseas investment cap has created uncertainty for some investors, prompting concerns about whether international mutual funds remain a viable investment avenue.
Pathak said the overseas investment limits are regulatory constraints and do not change the long-term investment rationale for global diversification and investors should avoid altering their strategy solely because of these temporary restrictions.
Agarwal echoes a similar view. He said there is no reason to panic or exit from your existing international fund investments in a hurry, especially if you are sitting on good gains and an exit would attract heavy capital gains tax.
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He further said that the limit is a restriction on how much Indian mutual funds can invest abroad and not a problem with the underlying global companies your fund holds and review your allocation, and if fresh investment is paused, redirect that SIP amount to domestic funds.
Restrictions imposed
RBI has imposed limits on overseas investments for domestic mutual funds. This is currently capped at $7billion for the entire industry, with each asset management company allowed to invest up to $1 billion in foreign securities. Several fund houses have kept SIPs largely open, whereas lump-sum investments are still restricted in many schemes.
For Edelweiss Mutual Fund schemes, maximum systematic investment plan (SIP/)systematic transfer plan (STP) of Rs 5,000; for PGIM Mutual Fund schemes: maximum SIP/STP of Rs 2 lakh; for Franklin Mutual Fund schemes, maximum Rs 5 lakh, lumpsum and maximum Rs 50,000 SIP/STP.
Recently, PGIM India Mutual Fund has reopened subscriptions in its three international funds for the second time in CY26. Axis Mutual Fund announced temporary suspension of subscription to units in Axis Global Equity Alpha Fund of Fund, Axis Global Innovation Fund of Fund and Axis Greater China Equity Fund of Fund with effect from May 13.
Axis Mutual Fund has temporary suspended subscription in its three international funds and removed Rs 1 lakh per PAN per month limit earlier applicable.
Wait for overseas investment limits to ease before taking global exposure?
With no clarity on when the limits may be revised, many investors are wondering whether it is better to wait before seeking international exposure.
According to Agarwal, waiting indefinitely in cash or liquid funds for restrictions to be lifted may not be the best approach. He notes that when similar limits were breached earlier, it took several months before fresh investments were permitted again. Instead of waiting, investors should look at alternative options currently available to build global exposure gradually.
Pathak also said that no, investors should focus on maintaining their desired asset allocation rather than waiting for limits to be revised and global diversification remains important, and alternative routes to international exposure are available.
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Alternatives for global exposure
As access to international mutual funds remains restricted in some cases, investors are exploring other ways to gain overseas exposure. There are other possible options to global exposure which includes through the LRS route, GIFT City leaving investors confused which one to pick for investment in case the limits are not increased.
In budget 2025, Finance Minister Nirmala Sitharaman announced an increase in the threshold for tax collected at source (TCS) on remittances under RBI’s Liberalized Remittance Scheme (LRS) from Rs 7 lakh to Rs 10 lakh which market experts then believed will reduce the upfront tax burden for investors remitting funds abroad.
Pathak said investors can consider direct global investing through LRS or explore global investment opportunities available through the GIFT City ecosystem and the focus should remain on maintaining global diversification rather than delaying investments due to regulatory limits.
Agarwal said the easiest option available right now is to invest in international ETFs listed on NSE or BSE, such as Nasdaq 100 ETF, as some of these still have scope of taking money under separate sub-limits.
He further said that another route is the LRS scheme, where you can remit up to USD 2.5 lakh per year and directly buy US or global stocks through available platforms.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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