Knowledge about International Funds

1. What are International Funds?
• Of the International Funds available to investors I India, there are country -
specific, region-specific and thematic funds.
• For Example, there are funds that invest in the US, Brazil or Europe. Apart
from this, there are themselves based funds investing in sectors such as
consumption, energy and real estate.
• As a resident Indian investor, you have to invest only in Indian Rupees. Like
any other Mutual Fund, you can select the fund, write a cheque and submit
the application form to a fund house. You may even invest in Online.
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2. How do global funds invest?
• Funds on offer to Indian investors invest in international markets either
directly or have the option to invest in other funds in those markets.
• The latter way is called a feeder route and is in the form of a fund of funds.
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3. What is the advantages of International
Funds?
• There are many stocks or businesses which are not available in the listed
space in India.
• For Example, cola companies. You can be part of the growth stories of such
companies through international funds that also helps you diversify across
geographies.
• For Example, when the Indian economy isn’t doing well, global markets may
give you higher returns.
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4. Are there any risks of investing in
these funds?
• In addition to normal risks of investing in stocks. International funds also comes with
currency risks.
• They could happen due to fluctuations in the value of other market currency against
the Indian Rupees. While you will invest in Rupee, the fund house will have to take
exposure to international stocks in various currencies. Therefore, investors have to
be prepared for currency risks because any fluctuations will directly impact the net
asset value(NAV) of the fund.
• For Example, if the Rupee depreciates against the dollar, you will get more Rupees
for every dollar, you will get more Rupees for every dollar invested, and your NAV
could be higher. On the other hand, if the Rupee appreciates against the dollar, you
get fewer Rupees for every dollar Invested.
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5. What’s the tax treatment of international
funds?
• From the taxation point of view, international funds are treated on a par
with debt mutual funds. For a holding period of less than three years, an
investor is required to pay short-term capital gain tax on the profit as per
his tax slab.
• When it is held for more than three years, the investor will get indexation
benefit as the profit is treated as long-term capital gains. Post indexation,
the gain is taxed at 20%.
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