Being the only category to offer double-digit returns in the past month, international mutual funds have outperformed domestic equity mutual funds.
International funds have offered an average return of around 11.68%, whereas domestic mutual fund categories have offered average return ranging between 0.47% to 8.37% in the mentioned period. There were 20 equity mutual fund categories including sectoral and thematic funds in the said period.
Also Read | MF Tracker: Can this mega largecap fund add stability to your portfolio in volatile market?
An expert noted that these gains were driven by geopolitical developments such as the Trump tariff announcements and trade deals. In recent months, international markets have seen increased volatility, influenced by country-specific events—for example, China’s major stimulus package announced in late September 2024 triggered a sharp market rally. Similarly, in the U.S., post-election speculation, tariff wars, and trade negotiations have heightened market activity.
Commenting on domestic funds performance against stellar performance by international funds, Chethan Shenoy, Executive Director & Head - Product & Research, Anand Rathi Wealth Limited mentioned that such short-term rallies are often volatile and unsustainable as they are event driven, over a longer horizon, Indian markets have delivered stronger performance- Nifty 50 has a 5-year CAGR of 22.22%, while international funds averaged 14.58%.
“Actively managed funds such as Flexi Cap, Multi Cap and Large & Mid Cap funds have done even better, delivering 24.26%, 28.44% and 26.93% respectively, outperforming the index itself over the same 5-year timeline,” he added.
Shenoy further adds that when we look at the long-term risk-adjusted returns of global markets, the U.S. and Indian markets have shown better efficiency compared to China, Hong Kong and Japan, whereas the domestic funds, on the other hand, have higher return potential with a wide range of categories to pick from.
“Indian markets offer easier access to data and are simpler to track, making them more suitable for investors. Given the complexity of global markets, well-diversified domestic funds remain the better choice for investors.”
Among the 65 international funds, Nippon India Taiwan Equity Fund offered the highest return of around 29.51% in the said period. Invesco India - Invesco Global Consumer Trends FoF and Mirae Asset Global X Artificial Intelligence & Technology ETF FoF offered 23.18% and 21.51% returns, respectively in the mentioned period.
Four international funds gave negative returns in the last month. ICICI Pru Strategic Metal and Energy Equity FoF lost the most of around 2.13%, followed by Axis US Treasury Dynamic Bond ETF FoF which lost 1.15% in the same period. DSP US Treasury FoF and Aditya Birla SL US Treasury 3-10 year Bond ETFs FoF lost 0.99% and 0.11% respectively in the same period.
Also Read | Mutual funds for beginners: What strategy should students adopt to start investing?
Among the 20 domestic equity mutual fund categories, banks and financial services funds have offered the lowest average return of around 0.47% in the last one month. Large cap funds gave an average return of around 2.40% in the same period and flexi cap funds gave 2.90% average return in the mentioned period.
The large & mid-cap funds offered an average return of 3.27%, and multi cap funds gave 3.49% average return in the similar time frame. In the last one month, small cap funds delivered 4.15% average return whereas mid cap funds gave 4.70% average return. Auto sector based funds gave the highest average return of 8.37% in the same period.
Even after international funds have delivered a stellar performance in the last one month over domestic funds, the expert doesn’t recommend investing in international funds, but if one looks for global diversification in the portfolio, they can explore only upto 5 -10% of the overall portfolio.
“Investors can consider investing across the range of domestic diversified equity funds to get exposure across the range of categories and sectors to generate good alpha and returns in the long term,” Shenoy recommended.
In the last month, Nasdaq has gained 18.91%, followed by DAX, which gained 13.75% in the same period. S&P 500 gained 13.31% in the mentioned period. The Hang Seng index went up by 11.337% in the same period.
Dow Jones in the said period gained 9.67%, followed by NYSE, which gained 8.74% in the same period. The Indian benchmark indices - Nifty50 and BSE Sensex- went up by 2.85% and 2.76% respectively in the same period.
After seeing the performance of international funds, investors wonder when and how they should review their portfolios if this gap continues between the global and domestic funds.
Also Read | Why retail investors should consider STPs during volatile markets
To answer this question, Shenoy said that several global and external factors drive international markets, making it difficult for investors to track and make informed decisions.
“As per the IMF projections, India is set to grow at 6.2 to 6.3% in the coming years, which is the highest among the developed economies and emerging ones like China. Inflation is under control with CPI at 3.14% for April, the lowest in six years and below the RBI’s target. The interest rate environment is favourable, with lower inflation, controlled fiscal deficit, and anticipation of rate cuts pointing to a downward trend in rates.”
“April 2025 witnessed GST collections reaching an all-time high of Rs 2.37 lakh crore, reflecting strong consumption and economic momentum. The fiscal outlook remains stable, with the fiscal deficit for FY26 projected at 4.4%, supported by robust revenue generation from direct taxes.”
Considering these factors, Shenoy advises not allocating a significant portion to international funds.
International funds cater to different broad international markets, commodities, foreign indices, among others, and to sum it up, the performance of the scheme will depend on under which geography your money is invested. That means you should pay extra attention to your investments in international funds. Pay extra attention to which geography or indices you are investing in.
One should always choose a scheme based on risk appetite, investment horizon, and goals.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on [email protected] alongwith your age, risk profile, and Twitter handle.
International funds have offered an average return of around 11.68%, whereas domestic mutual fund categories have offered average return ranging between 0.47% to 8.37% in the mentioned period. There were 20 equity mutual fund categories including sectoral and thematic funds in the said period.
Also Read | MF Tracker: Can this mega largecap fund add stability to your portfolio in volatile market?
Best MF to invest
Looking for the best mutual funds to invest? Here are our recommendations.
Commenting on domestic funds performance against stellar performance by international funds, Chethan Shenoy, Executive Director & Head - Product & Research, Anand Rathi Wealth Limited mentioned that such short-term rallies are often volatile and unsustainable as they are event driven, over a longer horizon, Indian markets have delivered stronger performance- Nifty 50 has a 5-year CAGR of 22.22%, while international funds averaged 14.58%.
“Actively managed funds such as Flexi Cap, Multi Cap and Large & Mid Cap funds have done even better, delivering 24.26%, 28.44% and 26.93% respectively, outperforming the index itself over the same 5-year timeline,” he added.
Shenoy further adds that when we look at the long-term risk-adjusted returns of global markets, the U.S. and Indian markets have shown better efficiency compared to China, Hong Kong and Japan, whereas the domestic funds, on the other hand, have higher return potential with a wide range of categories to pick from.
“Indian markets offer easier access to data and are simpler to track, making them more suitable for investors. Given the complexity of global markets, well-diversified domestic funds remain the better choice for investors.”
Among the 65 international funds, Nippon India Taiwan Equity Fund offered the highest return of around 29.51% in the said period. Invesco India - Invesco Global Consumer Trends FoF and Mirae Asset Global X Artificial Intelligence & Technology ETF FoF offered 23.18% and 21.51% returns, respectively in the mentioned period.
Four international funds gave negative returns in the last month. ICICI Pru Strategic Metal and Energy Equity FoF lost the most of around 2.13%, followed by Axis US Treasury Dynamic Bond ETF FoF which lost 1.15% in the same period. DSP US Treasury FoF and Aditya Birla SL US Treasury 3-10 year Bond ETFs FoF lost 0.99% and 0.11% respectively in the same period.
Also Read | Mutual funds for beginners: What strategy should students adopt to start investing?
Among the 20 domestic equity mutual fund categories, banks and financial services funds have offered the lowest average return of around 0.47% in the last one month. Large cap funds gave an average return of around 2.40% in the same period and flexi cap funds gave 2.90% average return in the mentioned period.
The large & mid-cap funds offered an average return of 3.27%, and multi cap funds gave 3.49% average return in the similar time frame. In the last one month, small cap funds delivered 4.15% average return whereas mid cap funds gave 4.70% average return. Auto sector based funds gave the highest average return of 8.37% in the same period.
Even after international funds have delivered a stellar performance in the last one month over domestic funds, the expert doesn’t recommend investing in international funds, but if one looks for global diversification in the portfolio, they can explore only upto 5 -10% of the overall portfolio.
“Investors can consider investing across the range of domestic diversified equity funds to get exposure across the range of categories and sectors to generate good alpha and returns in the long term,” Shenoy recommended.
In the last month, Nasdaq has gained 18.91%, followed by DAX, which gained 13.75% in the same period. S&P 500 gained 13.31% in the mentioned period. The Hang Seng index went up by 11.337% in the same period.
Dow Jones in the said period gained 9.67%, followed by NYSE, which gained 8.74% in the same period. The Indian benchmark indices - Nifty50 and BSE Sensex- went up by 2.85% and 2.76% respectively in the same period.
After seeing the performance of international funds, investors wonder when and how they should review their portfolios if this gap continues between the global and domestic funds.
Also Read | Why retail investors should consider STPs during volatile markets
To answer this question, Shenoy said that several global and external factors drive international markets, making it difficult for investors to track and make informed decisions.
“As per the IMF projections, India is set to grow at 6.2 to 6.3% in the coming years, which is the highest among the developed economies and emerging ones like China. Inflation is under control with CPI at 3.14% for April, the lowest in six years and below the RBI’s target. The interest rate environment is favourable, with lower inflation, controlled fiscal deficit, and anticipation of rate cuts pointing to a downward trend in rates.”
“April 2025 witnessed GST collections reaching an all-time high of Rs 2.37 lakh crore, reflecting strong consumption and economic momentum. The fiscal outlook remains stable, with the fiscal deficit for FY26 projected at 4.4%, supported by robust revenue generation from direct taxes.”
Considering these factors, Shenoy advises not allocating a significant portion to international funds.
International funds cater to different broad international markets, commodities, foreign indices, among others, and to sum it up, the performance of the scheme will depend on under which geography your money is invested. That means you should pay extra attention to your investments in international funds. Pay extra attention to which geography or indices you are investing in.
One should always choose a scheme based on risk appetite, investment horizon, and goals.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on [email protected] alongwith your age, risk profile, and Twitter handle.
