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As India lags behind global peers, this is how you can make money

Nilesh Shah, MD, Kotak AMC, says on a five-year basis, India is still the standout outperformer.

, ETMarkets.com|
Updated: Feb 28, 2019, 01.11 PM IST
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An international fund is a fund that invests in companies or funds located outside of its investors’ country of residence.
The domestic equity market has been underperforming most of its global peers for two months now. On a year-to-date basis, India is the odd man out with negative performance whereas most global peers have rallied up to 10 per cent.

If you are worried that this slowdown is making your portfolio to lag behind, the option for you is to go global through international funds or funds of funds.

An international fund is a fund that invests in companies or funds located outside of its investors’ country of residence.

Data available at Value Research portal shows net asset value of international funds soared up to 20 per cent in last one year. While Reliance US Equity Opportunities Fund and ICICI Prudential US Bluechip Equity Fund soared 21 per cent and 18 per cent, respectively, others like DHFL Pramerica Global Equity Fund Opportunities, Aditya Birla Sun Life Global Real Estate Fund, Franklin India Feeder Franklin US Opportunities Fund, Motilal Oswal Nasdaq 100 Exchange Traded Fund, DSB US Flexible Equity Fund, Kotak US Equity Standard Fund and HSBC Brazil Fund rallied between 10 per cent and 17 per cent in last one year.

On an average, international equity delivered around 4 per cent return in last 12 months, whereas domestic largecap equity tanked 8 per cent and smallcap and midcap funds slipped 21 per cent and 12 per cent, respectively.

While Brazil’s Bovespa soared nearly 14 per cent in last one year till February 20, Wall Street’s Nasdaq and Dow Jones Industrial Average indices gained over 10 per cent on a year-to-date basis. Asian peers such as Hang Seng and Shanghai are up about 10 per cent in 2019 so far. Nifty is down over 1 per cent on a year to date basis.

However, Vidya Bala, head of mutual fund research, FundsIndia, has a word of caution.

“Investor should be wary of entering international funds on the basis of short-term performance. Instead of timing investment in an international fund, use them for diversification,” she said.

“A market that has a lower correlation with India and US can do a better job of diversification. The US market is looking overvalued compared with the Indian market in terms of valuation. One can think of putting 10-15 per cent of money in these funds,” she said.

Among others, DSP World Energy Fund, DSP Global Allocation Fund and Edelweiss US Value Equity Off-shore Fund gained over 5 per cent in last one year.

These are funds of funds that invest in units of other global funds. In addition to this, a significant part of its corpus is also invested in units of other similar overseas mutual funds. For instance, Edelweiss US Value Equity Off-shore Fund invests in JPMorgan’s US Value Fund, an equity fund which invests primarily in shares of US companies.

Nilesh Shah, MD, Kotak AMC, says on a five-year basis, India is still the standout outperformer.

“As there are elections approaching over next three months in India, people want to be cautious. They want to keep their money on the sidelines and they will take an investment view probably when the market starts pricing in the election results or post-election. Flows have also become shallow. Domestic mutual funds are witnessing a slowdown in flows. FII flows are marginally positive but the combination of institutional flows has turned a little shallow and all of these put together is having an impact on the market,” said Shah.


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