How to Invest in International Funds from India: Complete Guide for Indian Investors

Traditionally, Indians invested in domestic stocks, mutual funds and other India-centric investments. With newly accessible global markets, investors have the option of investing in foreign companies and foreign economies outside of India.

This is where international funds come into play.

Foreign, or international, funds provide a convenient and easy way to invest offshore without selecting and buying individual foreign stocks. Depending on the fund, investors may get exposure to different developed or emerging market countries, sectors or larger investment themes.

HDFC International provides one such example in their July 2026 presentation with outbound Fund-of-Fund schemes to track the MSCI World Index and MSCI Emerging Markets Index.

How does international investing work for an Indian investor? What is GIFT City? What is the significance of the Liberalised Remittance Scheme (LRS)? What are the associated costs and risks?

We can address all of these, in order.

What are International Funds?

International Funds permit investors to gain exposure to money markets outside of their country.

"For an Indian investor," this could mean exposure to the following markets:

• United States

• Japan

• United Kingdom

• China

• Taiwan

• South Korea

• Other developed or emerging economies

The convenience is that investors do not have to do the work of researching and purchasing foreign companies themselves.

For example, an index-focused International Fund of Funds could invest in a foreign index fund or ETF, thereby offering the investor exposure to a host of international companies.

The example provided in the HDFC International presentation states that their Fund-of-Fund schemes investing in overseas index funds and/or ETFs Tracking MSCI World and MSCI Emerging Markets are open-ended schemes.

Why Should You Consider Investing Outside India?

Higher returns from other stock markets aren’t the only reason to consider investing abroad.

I propose diversification of your equity investments.

An investor who holds all of his equity investments in India will be highly exposed to all of the factors and cycles of India’s economy.

With India-only investments, you will be exposed to India’s economic sectors, companies, interest rates, currency, and market cycles.

International investments provide exposure to:

• Economies

• Companies

• Industries

• Currencies

• Economic cycles

• Market drivers

The HDFC presentation lists several characteristics of investing globally, including diversification across economies and markets, exposure to international growth opportunities, lower correlation across markets, and more, as potential benefits of going beyond national borders.

Let's consider a simple illustration.

Let’s say Indian stock markets are performing poorly, while stock markets of certain other countries of the world are moving in the opposite direction.

If you have made investments in both, your portfolio will not be solely affected by the worst performance of a country’s equity market.

This doesn't eliminate losses. It simply changes the sources of risk and return.

How Can Indians Invest in International Funds?

There isn't one universal route for every international investment.

The appropriate route depends on the product, structure, investor eligibility and applicable regulations.

One structure highlighted in the HDFC presentation uses GIFT IFSC.

The basic structure can be understood as:

Indian Investor → IFSC Fund → Overseas Index Fund/ETF → International Markets

In the HDFC example, HDFC AMC International (IFSC) Limited acts as the investment manager, with the outbound fund investing in an international fund or ETF that tracks the relevant index.

What Is GIFT City and Why Does It Matter?

GIFT City is located in Gujarat and has India’s International Financial Services Centre (IFSC).

As per the HDFC Presentation, GIFT City is the first operational IFSC in India and is regulated by the International Financial Services Centres Authority (IFSCA).

IFSCA manages the data of registered Fund Management Entities and authorized schemes/funds in GIFT IFSC.

For investors, the key thing is that GIFT IFSC provides a platform with which certain investment funds can be structured for international investment.

It can therefore connect Indian investors to overseas investment markets.

What Is the Liberalised Remittance Scheme (LRS)?

The Liberalised Remittance Scheme (LRS) is a facility introduced by the RBI which enables eligible resident individuals to send money abroad for permissible transactions within the specified limits and conditions.

As of current, the RBI allows resident individuals to send up to $250,000 per financial year under the LRS for permitted transactions from both current and capital account transactions and also for permitted overseas investment.

The HDFC presentation also references the USD 250,000 annual LRS limit for resident individuals in the context of its international fund offering.

Important

The LRS limit is not a recommendation to invest USD 250,000.

It is a regulatory limit, not an investment target.

An investor should consider their:

• Financial goals

• Risk tolerance

• Existing asset allocation

• Investment horizon

• Currency exposure

• Tax position

• Liquidity requirements

before investing.

Developed Markets vs Emerging Markets

International investing doesn't mean investing in only US stocks.

Global markets can broadly be divided into developed markets and emerging markets.

Developed Markets

Examples include:

• United States

• Japan

• United Kingdom

• France

• Canada

• Switzerland

The MSCI World Index captures large- and mid-cap equities of developed markets.

According to the HDFC presentation, their MSCI World offering exposes investors to around 23 developed markets and over 1,200 securities.

Emerging Markets

Emerging markets comprise nations such as:

• China

• Taiwan

• South Korea

• India

• Brazil

• Other developing economies

The MSCI Emerging Markets Index captures large- and mid-cap stocks in all emerging markets.

As per HDFC, its emerging market offering provides exposure to the 24 emerging markets and over 1,100 constituents.

What Is the MSCI World Index?

The MSCI World Index is a broad developed-market equity index.

According to the data in the July 2026 HDFC document, the country exposure as of June 30, 2026 included:

This is an important point for Indian investors.

"Global" doesn't mean equally distributed across countries.

The MSCI World exposure shown in the presentation is heavily weighted toward the United States.

The sector allocation also has a significant technology component:

• Information Technology: 30.3%

• Financials: 15.9%

• Industrials: 11.6%

• Healthcare: 9.1%

• Consumer Discretionary: 8.9%

• Communication Services: 8.1%

What Is the MSCI Emerging Markets Index?

The MSCI Emerging Markets Index provides exposure to emerging economies.

The HDFC presentation's June 30, 2026 data shows:

The sector allocation is also noteworthy:

• Information Technology: 45.3%

• Financials: 18.4%

• Consumer Discretionary: 7.2%

• Industrials: 6.8%

• Materials: 5.4%

• Energy: 3.1%

So an emerging-market fund isn't automatically a balanced representation of every developing economy. Its actual country and sector composition matters.

HDFC International Outbound Funds: An Example

The July 2026 HDFC International presentation describes two outbound offerings:

HDFC International – Developed Markets Equity Fund

An open ended Fund-of-Fund scheme invests in over-sea Index Funds and/or ETFs which track the MSCI World Index.

The underlying index comprises large- and mid-cap stocks of developed market countries.

HDFC International – Emerging Markets Equity Fund

This is an open-ended Fund-of-Fund scheme which invests in over-sea Index Funds and/or ETFs that track the MSCI Emerging Markets Index.

These Fund structures are from external sources and represent international fund structure examples. They are not recommendations that either fund is appropriate for all investors.

What Is a Fund of Fund?

A Fund of Fund (FoF) invests in other investment funds, instead of directly investing primarily in individual securities.

In the structure of HDFC as presented:

Investor

↓

HDFC International Outbound Fund

↓

International Index Fund / ETF

↓

Underlying Global Securities

This structure can provide diversified overseas exposure without requiring the investor to personally buy and manage every foreign stock.

How Much Money Do You Need?

The minimum investment requirement depends on the particular international fund.

For the HDFC International outbound funds described in the July 2026 presentation, the stated terms include:

• Minimum capital commitment: USD 5,000

• Additional capital commitment: USD 500 minimum

• Minimum redemption request: USD 500

• No lock-in

• Daily subscription/redemption and valuation on business days

The USD 5,000 minimum capital commitment is particularly important because the document says it is to be maintained at all times.

Therefore, investors should always check the current scheme documents before investing rather than assuming that every international fund has the same minimum.

What Are the Costs?

International funds can involve multiple layers of costs.

For the HDFC International funds described in the presentation, the Regular Plan – Class B TER is stated as 1.00% per annum.

However, the presentation explicitly notes that the underlying master fund has its own TER applicable over and above the TER of the Fund.

Exit load

The presentation states:

This illustrates why investors should look beyond headline returns and understand the total cost structure before investing.

Currency Risk: The Part Indian Investors Should Not Ignore

When an Indian investor invests in an overseas asset, there are potentially two moving parts:

Investment performance + Currency movement

For example, suppose an overseas investment rises in its foreign currency. The investor's INR-denominated return can still be affected by how that currency moves against the rupee.

Similarly, a favourable currency movement can increase the INR value of an overseas investment, while an unfavourable movement can reduce it.

The HDFC presentation specifically discusses currency diversification and compares the contribution of currencies such as USD, JPY, GBP, CNY, TWD and KRW relative to INR.

Therefore:

Foreign-market return ≠ automatically the same as INR return.

This is one of the most important concepts for an Indian investor considering international funds.

Are International Markets Less Risky Than India?

Not necessarily.

International diversification can reduce concentration in one domestic market, but it does not remove investment risk.

The HDFC presentation highlights international-investment risks including:

• Market risk

• Currency risk

• Geopolitical risk

• Differences in market practices

• Risk of loss of capital

Therefore, the correct way to think about international investing is:

Diversification can change the sources of risk; it does not eliminate risk.

International Funds vs Direct Foreign Stocks

Indian investors can encounter two broad approaches to overseas investing: investing through a fund or directly buying foreign securities.

Neither approach is automatically better.

The appropriate choice depends on the investor's objectives, knowledge, portfolio size, risk tolerance and preferred level of involvement.

International Funds vs Indian-Only Portfolio

Consider an investor whose equity portfolio is almost entirely India-focused.

Adding international exposure can potentially introduce exposure to:

• Different economies

• Different companies

• Different sectors

• Different currencies

• Different market cycles

The HDFC presentation also compares global and Indian market returns and highlights the changing leadership of global markets over time.

However, investors shouldn't choose an international fund simply because it recently outperformed Indian markets.

Past performance is not a reliable indicator of future performance.

Who Should Consider International Funds?

International funds may be worth researching for investors who:

• Already have a reasonably diversified Indian portfolio

• Want geographical diversification

• Have a long-term investment horizon

• Understand currency risk

• Can tolerate equity-market volatility

• Want exposure to companies/economies outside India

• Don't want to select individual foreign stocks themselves

These are general considerations, not personalized investment advice.

Who Should Be Careful?

International funds may require additional caution if you:

• Need the money in the short term

• Cannot tolerate equity-market volatility

• Don't understand currency movements

• Are already heavily exposed to the same global sectors

• Are investing only because a foreign market recently performed well

• Haven't considered taxation and transaction costs

• Need high liquidity with minimal exit costs

How to Choose an International Fund

Don't select an international fund simply because its name contains words such as "global" or "international."

Check these factors first.

1. Investment objective

Understand exactly what the fund invests in.

2. Index or strategy

Is it tracking MSCI World, MSCI Emerging Markets or another benchmark?

3. Geographic allocation

Check how much exposure exists to the US, China, Japan, Taiwan, India and other countries.

4. Sector allocation

A supposedly diversified global fund may still have substantial technology exposure.

5. Top holdings

Look at the concentration in the largest companies.

6. Costs

Check the fund's TER and whether an underlying fund has an additional expense ratio.

7. Exit load

Understand the cost of redeeming before the applicable period.

8. Currency exposure

Know how foreign exchange movements can affect your INR returns.

9. Taxation

Understand the tax treatment applicable to the specific structure before investing.

10. Risk

Read the scheme documents and risk factors rather than relying solely on historical returns.

What About Taxation?

Tax treatment depends on the specific fund structure, investor status, holding period and applicable tax rules.

The HDFC presentation states that for its outbound funds:

• Holdings above 24 months are treated at the long-term post-tax NAV

• Holdings below 24 months are treated at the short-term post-tax NAV.

However, investors should not assume that this treatment applies to every international fund available in India.

Tax rules can change, and the treatment can differ depending on the structure.

Investors must confirm the present Scheme documents and get appropriate tax advice before executing an actual investment.

A Handy Checklist Before Investing

Investors should ask the following before investing in an international fund from within India.:

Portfolio

☐ Have I already fulfilled my Indian equity diversification?

☐ Why do I need international exposure?

Fund

☐ Which index or strategy does the fund follow?

☐ Which countries do you invest in?

☐ What sectors does the fund concentrate on?

☐ How concentrated are the top holdings?

Costs

☐ What is the TER?

☐ Is there an underlying fund expense?

☐ Is there an exit load?

Currency

☐ Am I aware of USD-INR and other currency risks?

Regulation & Documentation

☐ Is the fund/entity regulated?

☐ Have I read the last Scheme/Offer documents?

☐ Do I have clarity on the investment route?

Risk

☐ Am I equipped to deal with international equity market movements?

☐ Will I be able to remain invested during a spell of market declines?