Mutual fund investors are left with these options after RBI's curb on overseas investments
Initially, when funds reached the RBI’s investment limit in 2022, it was believed to be temporary, with the cap expected to increase soon. However, the cap continues to remain unchanged, having deprived investors of overseas exposure for over two years now.
Of the 69 international funds, 26 have been closed in some capacity. Some have been toggling flows intermittently due to limited capacity. The Rs.7,500 crore Motilal Oswal Nasdaq 100 ETF initially paused flows for 3-4 months two years ago, but now remains open, providing liquidity daily based on demand. However, it uses outflows to manage limits and may close at any time. Pratik Oswal, Head, ETFs and Index Funds, Motilal Oswal AMC, points out, “We have some headroom to invest abroad, but we are not encouraging large investors and are giving preference to retail SIP contributions.”
Funds still open for both SIP and lump sum
With MF investors mostly shut out, an important lever of portfolio construction is now broken, insist experts. The 2011-2023 period proved rewarding for overseas investing, particularly in the US-dedicated equity funds. Motilal Oswal Nasdaq 100 ETF, the biggest such fund, has led the way with a stunning 22% annualised return since inception in March 2011. Franklin India Feeder Franklin US Opportunities and ICICI Prudential US Bluechip, both launched in 2012, have yielded 15.8% since inception. DSP US Flexible Equity, another 2012 launch, has also clocked 14.9%. While returns have been great, the real utility of global funds lies in their
