Investors in India are no longer limiting themselves to domestic opportunities. With global companies like Apple, Amazon, Microsoft, and Tesla leading innovation, many investors want to go beyond Indian markets and capture long-term growth. ThatтАЩs where international mutual funds come in.
These funds let you participate in the performance of global markets, offering diversification, access to world-leading businesses, and potential for higher returns. They also act as a hedge against domestic market volatility and currency fluctuations which make them an important part of a well-rounded portfolio.
In this article, weтАЩll explore the best international mutual funds available to Indian investors, focusing on performance, benefits, and factors to consider before choosing the right one for your goals.
What Are International Mutual Funds?
International mutual funds, also called foreign mutual funds, are schemes that invest in companies listed outside India. Unlike a domestic equity mutual fund that buys shares of Indian companies, an international stock mutual fund allocates capital to businesses across global markets, from the U.S. and Europe to other emerging economies.
The key difference between domestic and international stock mutual funds lies in where your money works. While domestic funds limit exposure to Indian markets, international or global funds open the door to stocks of companies like Apple, Amazon, Tesla, Microsoft, and others.
For Indian investors, these funds are becoming increasingly popular because they provide exposure to opportunities not available locally. Adding global equities to a portfolio lets you spread your investments across geographies, lower country-specific risk, and get into sectors that may not be well-represented in India.
Benefits of Investing in International Mutual Funds
Investing in the best international mutual funds can add significant value to a portfolio. Here are the core benefits:
- Geographic Diversification: Instead of relying only on the Indian economy, investors gain exposure to many regions. This helps balance risks, particularly during times when domestic markets underperform.
- Access to Global Giants: Through an international stock mutual fund, you can indirectly own shares of global leaders like Apple, Amazon, Google, and TeslaтАФcompanies that drive innovation and may not have comparable peers in India.
- Hedge Against Indian Market Volatility: Market downturns in India donтАЩt always coincide with declines abroad. Foreign mutual funds provide a cushion during periods of local volatility.
- Potential for Higher Returns: Certain global sectors, such as technology, healthcare, and clean energy, often deliver strong growth. By allocating to the top international mutual funds or the best-performing international mutual funds, you can benefit from these long-term trends.
Risks You Should Know Before Investing
While international stock mutual funds open the door to global opportunities, they also carry certain risks investors should weigh carefully:
- Currency Fluctuation Risks: Returns are impacted not just by how global stocks perform, but also by how the Indian Rupee moves against foreign currencies like the U.S. Dollar. A weaker rupee can boost returns, while a stronger rupee can reduce them.
- Country-Specific Risks: Political instability, regulatory changes, or economic downturns in foreign markets can directly affect the performance of foreign mutual funds. For example, global recessions or trade disputes can hit overseas companies harder than Indian ones.
- Higher Expense Ratios: Compared to domestic equity schemes, international mutual funds often have higher management fees because they involve global research, foreign partnerships, and additional operational costs. This can eat into overall returns if not carefully evaluated.
Top International Mutual Funds in India (Our Picks)
Here are some of the top international mutual funds based on their performance (data as of January 29, 2025):
| Fund Name | 3Y Annualised Return | Expense Ratio | AUM (тВ╣ Cr) |
| Edelweiss US Technology FoF Direct тАУ Growth | 20.63% | 0.68% | 2,645 |
| Invesco India Invesco Global Equity Income FoF Direct тАУ Growth | 16.86% | 0.86% | 25.99 |
| Franklin India Feeder Franklin US Opportunities Direct тАУ Growth | 16.35% | 0.62% | 3,748.66 |
| Aditya Birla Sun Life Global Excellence Equity FoF Direct тАУ Growth | 15.33% | 0.68% | 199.25 |
| Motilal Oswal S&P 500 Index Fund Direct тАУ Growth | 15.16% | 0.62% | 3,744.47 |
How to Choose the Right International Fund for You
With so many choices available, from U.S.-focused funds to global sectoral plays, here are some practical steps to help you pick the best international mutual funds for your portfolio:
- Align with Financial Goals & Risk Appetite: Decide why you want exposure to global markets. If your goal is long-term wealth creation with diversification, a broad-based top international mutual fund may be more suitable.
- Compare Performance History & Fund Manager Expertise: Look at the long-term track record of the best-performing international mutual funds, not just short-term returns. A skilled fund manager with experience in handling foreign equities is a key factor for consistency.
- Check Expense Ratios & Taxation Rules: Since these are foreign mutual funds, costs may be higher than Indian equity funds. Review expense ratios carefully, and also understand taxation rules: international funds are usually taxed as debt funds in India, which impacts post-tax returns.
Taxation of International Mutual Funds in India
When you invest in international mutual funds, the taxation rules are different from equity mutual funds in India. Since these funds invest in foreign equities, they are treated as debt funds (non-equity funds) under the Income Tax Act.
LetтАЩs break down how taxation works depending on when you invested and how long you hold it.
| Investment Date | Holding Period | Type of Gain | Tax Rate | Notes |
| Before April 1, 2023 | < 36 months | STCG | Slab rate | Added to income |
| Before April 1, 2023 | > 36 months (till July 23, 2024) | LTCG | 20% with indexation | Indexation benefit available |
| Before April 1, 2023 | > 24 months (after July 23, 2024) | LTCG | 12.5% (no indexation) | Budget 2024 change |
| On/After April 1, 2023 | Any period (till March 31, 2025) | STCG/LTCG | Slab rate | No indexation |
| On/After April 1, 2023 | < 24 months (from April 1, 2025) | STCG | Slab rate | Budget 2024 change |
| On/After April 1, 2023 | > 24 months (from April 1, 2025) | LTCG | 12.5% (no indexation) | Budget 2024 change |
| Any time | Dividends | тАФ | Slab rate | Taxed as тАЬIncome from Other SourcesтАЭ |
Example Scenario
Suppose you invested тВ╣2,00,000 in a top international mutual fund on March 1, 2022 and redeemed it on April 1, 2025:
- Since the investment was before April 1, 2023 and held for over 36 months, it qualifies as long-term.
- However, as per the Budget 2024 changes, LTCG will be taxed at 12.5% without indexation.
- So, if your redemption value is тВ╣2,80,000 (profit = тВ╣80,000), you will pay тВ╣10,000 as LTCG tax (12.5% of тВ╣80,000).
Final Thoughts
Investing in international mutual funds gives Indian investors access to global opportunities, top businesses, and diversification beyond domestic markets. The main advantages are geographic diversification, potential for higher returns, and a hedge against local market volatility.
That said, investors must remain cautious about currency risks, country-specific events, and higher expense ratios compared to domestic funds. Taxation rules also differ, as international funds are treated as non-equity (debt) funds in India, which can affect returns.
For modern investors, global exposure has become an important part of a balanced portfolio. Regularly reviewing performance, comparing fund managers, and aligning investments with your long-term goals will help you choose the best international mutual funds suited to your needs.
Start Investing with Daily SIP at Just тВ╣11 with Appreciate
If you’re looking to diversify your portfolio with international mutual funds, Appreciate offers an easy way to get started. With Daily SIP at just тВ╣11 a day, you can begin investing in top mutual funds without committing large amounts upfront. This allows you to take advantage of market growth, diversify your investments, and build wealth over timeтАФall while keeping your investments manageable. Start small, invest regularly, and watch your wealth grow with the power of Daily SIP through Appreciate.
Did you know?
US ETFs (Exchange Traded Funds) offer a great opportunity for investors looking to diversify their portfolio with international exposure. With Appreciate, you can now access these ETFs easily, benefiting from the growth of US-based companies. Investing in US ETFs can be a strategic way to tap into global markets, adding stability and potential growth to your investment strategy.
FAQs
What is an international mutual fund, and how does it work?
An international mutual fund is a scheme that invests in equities of companies listed outside India. Unlike domestic equity funds, these funds give exposure to foreign mutual funds and global markets, helping investors diversify beyond the Indian economy.
Which are the best-performing international mutual funds in India?
The best performing international mutual funds change over time depending on market cycles and sectors. Investors should compare returns, risk-adjusted performance, and fund manager track record before investing.
Are foreign mutual funds riskier than Indian mutual funds?
Yes, foreign mutual funds carry additional risks such as currency fluctuations and political/economic risks of the country where they invest. However, they also offer the benefit of diversification and exposure to global companies.
How are international stock mutual funds taxed in India?
International stock mutual funds are treated as debt funds for taxation. Short-term gains (holding period less than 24 months for investments after April 1, 2025) are taxed at the slab rate, while long-term gains are taxed at 12.5% without indexation. Dividends are added to your income and taxed as per your slab.
Can beginners invest in top international mutual funds?
Yes, beginners can invest in top international mutual funds through SIPs or lump-sum investments. However, they need to first understand the risks, taxation, and choose funds that align with their goals and risk appetite.
Disclaimer
The information provided in this article is for educational and informational purposes only. It should not be considered as financial or investment advice. Investing in stocks involves risk, and it is important to conduct your research and consult with a qualified financial advisor before making any investment decisions. The author and publisher are not responsible for any financial losses or gains that may result from the use of this information.
