Investing in global equities from India has become significantly more complicated since early 2022. SEBI’s industry-wide cap on overseas investments caused most international funds to close for new subscriptions. The April 2023 tax law change made remaining international funds less attractive. And yet, international diversification remains one of the most important allocations for Indian investors.

Here is the current state of what is available, what it costs, and what it returns.

The SEBI Overseas Investment Cap

In February 2022, SEBI directed all mutual funds to stop accepting new investments in overseas instruments after the industry collectively hit the $7 billion overseas mutual fund investment limit (set by RBI). Some room has been created as existing investments were redeemed, but many funds remain closed or with daily investment caps.

Status as of early 2024:

Fund Status Notes
Motilal Oswal S&P 500 Index Fund Closed to new SIPs ETF route available
Motilal Oswal Nasdaq 100 ETF Open (ETF, not fund) Demat account required
Mirae Asset NYSE FANG+ ETF Open Limited daily volume
Franklin India Feeder - US Opp. Fund Open with limits Small cap US focus
ICICI Pru US Bluechip Equity Fund Open (SIP allowed) Check current limits
Parag Parikh Flexi Cap Fund Open Partial international via domestic category

Always verify current status on the AMC website before investing - this changes frequently.

Returns Comparison: International vs Domestic

10-year returns in INR terms (2014-2024, approximate):

Index/Fund 10-Year CAGR (INR) 5-Year CAGR (INR)
S&P 500 (USD + INR depreciation) ~18.5% ~21.3%
Nasdaq 100 (USD + INR) ~22.1% ~23.8%
Nifty 50 (INR) 13.7% 15.2%
Nifty Midcap 150 (INR) 17.3% 21.8%
Hang Seng (China, INR) -1.2% -8.4%

The US market (especially Nasdaq 100) has dramatically outperformed Indian markets over the last decade in rupee terms. The China exposure available via some international funds has been a disaster.

Available Vehicles and Their Actual Returns

Motilal Oswal Nasdaq 100 ETF (N100)

  • Type: ETF (demat required)
  • Tracks: Nasdaq 100 (Apple, Microsoft, Nvidia, Amazon, Meta, Alphabet, Tesla)
  • Expense ratio: 0.57%
  • 5-year return (INR): ~23.2% CAGR
  • Tax: Slab rate (debt treatment, post April 2023)
  • Current status: Open for buying on NSE

ICICI Prudential US Bluechip Equity Fund

  • Type: Mutual Fund (FOF structure, feeder into Franklin US equities)
  • 5-year return: ~16.8% CAGR (INR)
  • Expense ratio: 0.42% (direct) + US fund fees (~0.85%)
  • Tax: Slab rate
  • Status: Open for SIP

Mirae Asset NYSE FANG+ ETF

  • Type: ETF
  • Tracks: NYSE FANG+ Index (10 stocks: Meta, Amazon, Netflix, Google, Apple, Tesla, Nvidia, Snowflake, Spotify, Microsoft)
  • Extreme concentration - 10 stocks
  • 5-year return (INR): ~28.1% (but very high volatility)
  • Tax: Slab rate
  • Risk: Extreme - single sector and small number of stocks

Parag Parikh Flexi Cap Fund (PPFCF)

  • Type: Domestic equity fund (equity tax treatment)
  • International allocation: 25-35% (mainly US blue chips)
  • Expense ratio: 0.77% (direct)
  • 5-year return (blended INR): ~22.4% CAGR
  • Tax: 12.5% LTCG (equity treatment because total international allocation is under 65% of AUM)
  • Status: Fully open

The Tax Mathematics Post-April 2023

Before April 2023: International funds taxed as equity funds (10% LTCG above Rs. 1 lakh, 15% STCG). After April 2023: International funds taxed at slab rate regardless of holding period (no LTCG benefit).

Impact for a 30% tax bracket investor:

Scenario Pre-Tax Annual Return Tax Rate Post-Tax Annual Return
Nasdaq 100 via N100 ETF 22% 30% slab 15.4%
Nasdaq 100 via LRS + US broker (VOO/QQQ) 22% 30% slab 15.4%
Parag Parikh (partial US exposure) 19% blended 12.5% LTCG 16.6%
Nifty Midcap 150 Index 17% 12.5% LTCG 14.9%

After the tax change, Parag Parikh’s equity tax advantage makes it more tax-efficient than a pure international fund even if the international fund has higher gross returns.

LRS Route: The Direct Approach

The Liberalised Remittance Scheme allows remitting up to USD 250,000/year to invest directly in US markets. Opening a Vested Finance or Interactive Brokers account allows buying:

  • VOO (Vanguard S&P 500 ETF): 0.03% expense ratio
  • QQQ (Invesco Nasdaq 100 ETF): 0.20% expense ratio
  • VTI (Total US market): 0.03% expense ratio

Tax treatment: Same as Indian international funds (slab rate on gains), but significantly lower expense ratios. Breakeven: LRS makes sense for amounts above Rs. 15-20 lakh/year where the 0.5%+ expense ratio saving justifies the TCS and compliance friction.

Diversification Value: Correlation Data

Historical correlation (2014-2024, monthly returns in INR):

  • Nifty 50 vs S&P 500: 0.54
  • Nifty 50 vs Nasdaq 100: 0.51
  • Nifty 50 vs Hang Seng: 0.38

A correlation of 0.54 means US and Indian equity returns are meaningfully uncorrelated. A 20% allocation to US equities in a Nifty 50 portfolio reduces portfolio volatility by approximately 2-3% (standard deviation) without significantly reducing expected returns - the definition of efficient diversification.

Bottom Line

International diversification is still valuable for Indian investors despite the 2023 tax change and SEBI restrictions. The post-tax math now favors Parag Parikh Flexi Cap Fund over pure international funds for most retail investors because equity tax treatment (12.5% LTCG) versus debt tax treatment (30% slab) creates a meaningful post-tax return advantage. For investors wanting pure international index exposure above Rs. 20 lakh/year, the LRS route via Interactive Brokers with Nasdaq 100 or S&P 500 ETFs provides the cleanest, cheapest structure. Avoid China-focused funds until there is clarity on regulatory and economic direction.