Global mutual funds are gaining popularity among Indian investors. These funds invest in overseas equities, bonds, or ETFs spanning regions such as the U.S., Europe, and emerging markets. They offer diversification beyond domestic holdings and can shield portfolios when Indian markets face headwinds.
With both India and select international markets showing strong gain trajectories in FY25–26, let’s see whether global mutual funds can outperform Indian ones.
What Are Global Mutual Funds?
Global funds such as US mutual funds are mutual fund schemes that allow Indian investors to gain exposure to international markets by investing in equities, debt, or ETFs listed outside India. These funds pool money from Indian investors and allocate it across companies or instruments operating globally, either directly or via feeder funds.
They are designed to diversify beyond domestic economic cycles and reduce portfolio concentration risk. Depending on their structure, they can be:
- Country-specific funds, focused on markets like the U.S., Japan, or China (e.g., Nasdaq-100 or S&P 500 funds).
- Thematic international funds, investing in global megatrends such as AI, electric vehicles, or healthcare innovation.
- Geographically diversified funds, offering exposure to multiple economies across developed and emerging markets.
- Feeder funds, investing in an underlying global fund through a local mutual fund wrapper.
As of FY25-26, global funds have seen growing interest due to the strong performance of U.S. tech giants, weakening rupee trends, and saturation in some domestic equity segments.
Domestic Mutual Funds
Domestic mutual funds in India primarily invest in companies within the country’s borders, providing investors with exposure to the robust and growing Indian economy. These funds collect money from numerous investors and strategically deploy it into various Indian assets, including stocks, bonds, gold, and money market instruments. They are managed by professional fund managers who aim to generate returns by actively buying, selling, and monitoring investments in the Indian market, rebalancing portfolios to meet specific objectives.
Domestic funds offer benefits like professional management, risk diversification across Indian securities, affordability, and liquidity for open-ended schemes. They are also well-regulated by the Securities and Exchange Board of India (SEBI) under SEBI (Mutual Funds) Regulations, 1996, ensuring investor protection and transparency.
Performance Comparison: Global vs. Domestic Mutual Funds
The question of whether global mutual funds can outperform domestic ones is complex, with performance varying based on numerous market dynamics and fund characteristics.
Recent Performance Trends in India
In recent months, international mutual funds have outperformed domestic equity categories in India. For example, international mutual funds offered an average return of approximately 14.5% in the last 1 year, with funds like Mirae Asset Hang Seng TECH ETF FoF providing returns as high as 52.06% in the last year. This outperformance has largely been driven by Foreign Institutional Investors (FIIs) shifting capital to markets like China and America.
In contrast, several Indian domestic equity mutual fund categories, including small-cap funds, infrastructure funds, and PSU funds, experienced negative returns in the same period. This short-term trend suggests that global funds can offer a buffer against domestic market downturns by tapping into high-growth sectors abroad.
Long-Term Perspective
Despite recent outperformance by international funds, some experts believe that over the long term, Indian markets tend to be more consistent. While global mutual funds offer the chance to capitalize on international growth, India’s long-term economic outlook remains robust. The IMF projects India’s GDP growth at 6.3 – 6.8% in 2025-26, supported by strong domestic consumption and reforms.
Domestic mutual funds, particularly those specializing in multi-asset or diversified equity strategies, are well-positioned for sustainable wealth creation. Experts suggest that while a small allocation (around 5-10%) to global funds can enhance diversification, domestic funds should remain the core of most Indian investors’ portfolios.
Conclusion
Global mutual funds can complement domestic portfolios by providing geography and sector diversification, hedging against local risks, and unlocking growth trajectories in overseas economies.
A balanced portfolio could allocate 10–30% to global funds. This allows investors to enjoy India’s growth while capturing global opportunities and cushioning against regional volatility. The global investment gateway isn’t meant to replace domestic investing, but to enhance it.
