International category offered an average return of 12.59% in three months, as per Value Research. The category was the top performer in the year-to-date, and one-month horizons. On a year-to-date basis, the category offered 8.78% return whereas, in a one-month time horizon, the category offered 4.24% return.
“The international market has performed better than the Indian market in the last three months. There was a deep correction earlier in the international market, which is slowly going back to the mean reversion,” says Nisreen Mamaji, founder, MoneyWorks Financial Advisors.
However, looking at the average returns and getting excited about international funds could be a big mistake. The category is vast and diverse. It caters to broad international indices, sector indices, commodities, among others. For example, the best performers have investments in markets like Hang Seng, NYSE, Greater China, and Pan European.
The global markets that performed exceptionally well are Hang Seng, NYSE, Greater China, and Pan European whereas other global markets such as the US, Nasdaq, and Brazil failed to perform better. The schemes investing in the top-performing global markets managed to offer double-digit returns. The top four schemes have offered more than 30% returns.
“The performance is dependent on where the money is invested – under which geography it has been invested because not all geographies are behaving in the same manner. There is a negative correlation with the Indian market actually when we are investing in international funds both dont behave in a similar manner. So it makes sense to actually put some allocation in international funds also,” says Rajesh Minocha, a Certified Financial Planner (CFP), Founder of Financial Radiance.
Here’s how the schemes performed in the category:
Source: Value Research, Returns as on February 12 2023
Mirae Asset Hang Seng Tech ETF was the topper in the category that offered around 38.55%, followed by Mirae Asset Hang Seng TECH ETF FoF which offered 36.24% return. Kotak Global Emerging Market, Mirae Asset S&P 500 Top 50 ETF FoF, and ICICI Prudential US Bluechip Equity Fund failed to offer better returns.
NASDAQ, Hang Seng, DAX, Dow Jones, and NYSE were up in the last three months, ranging from 4% to 30%. The recent outperformance of the schemes was majorly because of sharp correction seen in the prices of US stocks.
“One must invest in the international funds and there should be an allocation in international funds of around 10-15%. At all time you should have some allocation so that when the market starts performing you should not miss it. One must be careful about the country as the US economy which is the largest in the world or choose the fund which has allocation across the countries,” says Pankaj Mathpal, CFP, Optima Money Manager.
The category has around 70 schemes, out of which 36 schemes offered double-digit returns, 31 offered returns in single digit, and three schemes lost around 1-5%.
After the Sebi ordered that the overall investment limit was breached, several mutual funds stopped accepting investments in international funds. After a gap, most of the fund houses started accepting investments in international funds. However, it is not clear whether or when the limit will be increased. The RBI Governor Shaktikanta Das in the last policy meeting said “We have examined that. But we have not taken a positive decision on it yet. There is no proposal to increase the limits at the moment”.
