5 Key Benefits of Investing in Global Funds for Indian Investors

Over the past decade, Indian investors have become more confident and informed. Equity participation has grown rapidly, and domestic mutual fund SIPs are at record highs. Yet, as portfolios grow and goals become more global, many investors are asking an important question: Is investing only in India enough? As education, travel, healthcare, and lifestyle aspirations increasingly align with global opportunities, the idea of global investing in India is gaining momentum.

India is one of the fastest-growing major economies, but it represents only a small fraction of total global market wealth. This is where global funds for Indian investors come into the picture.

What is a Global Fund?

Global funds pool investors’ money and deploy it across multiple countries, sectors, and asset classes. These funds are managed by global asset managers who invest directly in foreign equities or bonds, with portfolios denominated in currencies such as the US dollar, the euro, or the yen. The fund manager takes active calls on country allocation, sector exposure, and stock selection at a global level.

This is different from India-based international or feeder funds. International funds registered in India invest only outside the country but are still managed and structured domestically. Feeder funds go a step further—they do not invest directly in global markets. Instead, they channel money into an underlying overseas “parent” fund, effectively mirroring its performance.

Why Indian Investors Should Consider Global Diversification

Here are some of the most common benefits of global funds:

Exposure to Global Market Leaders

With global funds, you can access companies that are leaders in their domain but not listed in India. Common examples of these companies include Apple, Microsoft, Johnson & Johnson, Nestlé, and Toyota. Additionally, you have access to sectors that India has not yet listed. The most popular example of this kind of business is a company specialising in surgical robotic devices.

Before investing, make sure you do not put all your capital into one specific sector or geography. For instance, if your investments heavily rely on US technology, a negative regulatory announcement could negatively impact your portfolio’s returns.

Reduces Portfolio Risk

Allocating capital to global funds reduces the risk in your portfolio. The reason? Economies and stock markets rarely move in perfect sync. For example, if India faces inflationary pressures or policy changes that dampen returns, exposure to US technology stocks or European healthcare firms can balance losses.

The most popular example to illustrate the point is the performance of the Nifty in 2020. During the pandemic, Nifty fell by 8.3% on 12 March and by nearly 13% on 23 March before recovering to deliver a calendar-year return of approximately 14.9%. In contrast, the S&P 500 surged about 18.4% in total return terms for the year. The performance was centred around tech giants such as Apple, Amazon, and Microsoft, which gained 82.3%, 72.6%, and 42.5%, respectively, collectively contributing over half of the index’s return.

Currency Appreciation 

When you invest in international funds, your money is deployed in assets denominated in foreign currencies. If the foreign currency appreciates against the Indian rupee, your returns increase when converted back. 

For example, suppose as a resident Indian, you put ₹100,000 into a US-focused global fund. Assume the fund grows by 10% in dollar terms over a year, so the investment becomes $1,100 (from $1,000). Suppose, at the time of investment, the exchange rate was ₹80 per USD, the initial ₹100,000 would be equivalent to $1,000. 

Now, if the rupee depreciates and the exchange rate moves to ₹85 per USD, the $1,100 is worth ₹93,500. Without currency movement, the return would have been ₹88,000, but due to dollar appreciation, you would have gained an additional ₹5,500.

Sector Diversification 

Investing exclusively in India primarily exposes you to banks, IT services, FMCG, and consumer stocks. If these stocks slow down together, your entire portfolio can struggle. But when you invest in global funds, you get exposure to sectors largely missing in India, such as biotechnology, advanced semiconductors, aerospace, defence, clean energy manufacturing, and medical innovation. 

For example, if Indian banks underperform due to rising NPA, but global semiconductor or healthcare stocks perform well, those gains can balance your portfolio.

Global Consumption Trends

Global funds allow you to benefit from international consumption trends. For example, if you invest in a US-listed streaming or AI device company, your returns depend on global subscribers and device buyers, not only Indian consumers. Even if Indian retail spending slows, growing demand in North America, Europe, or Southeast Asia can support company revenues. This allows you to benefit from booming sectors such as luxury travel booking platforms, wellness brands, and international e-commerce leaders with massive global scale.

Risks to Consider Before Investing in Global Funds

Before you invest in global funds, consider the following parameters:

Time Zone Lag

Global markets open and close while you sleep. Any major news, rate changes, or conflicts can move prices before Indian investors react. This delay affects how quickly fund houses can rebalance. For you, the NAV you see in India reflects yesterday’s world, not the live market. The pricing gap can lead to slow risk control during fast global events.

Liquidity Mismatch

Although not very common, some global funds hold assets that trade in smaller markets or deep-niche sectors where buyers are few. This can make it hard for the fund to sell quickly without cutting prices. In stress periods, this worsens. Even if the fund itself offers daily exits in India, the underlying assets may not be easy to convert into cash on equal terms.

Inflation Divergence

Global funds invest across nations where inflation cycles differ widely from India. If a country your fund invests in faces high inflation, it can force its central bank to lift rates aggressively. The result? You may notice lower equity valuations and bond prices inside the fund. This can further lead to higher costs, visible price increases, cost pressures and lower consumer spending. These local inflation shocks can dent company earnings and portfolio real returns.

Sector Concentration Risk

A global fund might look diversified by countries but still be heavy on one theme, like tech, energy, or defence. When a single global sector faces disruption, chip bans, oil collapse, AI regulation, or margin squeeze, the whole portfolio feels the blow together.

Derivative Overlay Risk

Some global funds use complex derivative instruments, such as swaps, options, and futures, to manage exposure. These tools carry counterparty risk, leverage risk, roll cost risk, and pricing opacity. Even if derivatives aim to hedge them, they can still add losses when contracts reset, expire, or counterparties struggle during stress.

How to Start Investing in Global Funds in India

Before you invest in global funds, consider the following parameters:

• Check whether the global fund objective matches your financial goals. Understand if it focuses on growth, income, or stability, and whether it invests across regions, themes, or specific countries to avoid misaligned expectations.
• Analyse the fund sector mix, such as technology, healthcare, finance, and consumer goods. Excessive concentration in a single sector may increase volatility, while balanced exposure improves stability across economic cycles.
• Compare the fund expense ratio with similar global funds available in India. High costs reduce long-term compounding returns, especially for international funds where performance margins can already be narrower.
• Look beyond recent returns and analyse three- to five-year rolling performance. Consistent results across market ups and downs reflect sound investment processes rather than reliance on isolated market rallies.

Conclusion

To benefit from a global fund, careful fund selection is important. Review the countries and sectors in which the scheme invests. Analyse the portfolio concentration risk, expense ratio, fund manager expertise, and long-term performance consistency. Global funds work best for long-term investors seeking diversification, professionals planning overseas goals, high-income earners wanting currency hedging, and portfolios heavily tilted toward India. Investors with shorter horizons or lower risk tolerance should consider smaller or gradual allocations.