MFs see growth opportunities abroad; line up global funds
Mutual funds are lining up to tap investors' appetite for global markets with schemes aimed at investing in other countries - which they claim would also act as a hedge against fall in the domestic stock market.
By PTI |
NEW DELHI: Mutual funds are lining up to tap investors' appetite for global markets with schemes aimed at investing in other countries - which they claim would also act as a hedge against fall in the domestic stock market.
While DSP Merrill Lynch and Kotak MF have launched their global funds last week, one of the country's biggest fund houses UTI MF and HSBC Asset Management Company are also planning to launch new schemes that would invest overseas.
Besides, there are various schemes from Sundaram BNP Paribas, Principal MF, Fidelity International and Franklin Templeton that provide an opportunity to Indian investors to get an exposure to global markets.
Market observers say despite significant gains in domestic market, there have been bouts of volatility and a diversified portfolio spread across the boundaries could be the best bet for investors. This helps to reduce overall investment risk as a decline in one market could often be offset by a rise in another, they said.
"Investment in overseas markets provides a hedging mechanism for investors to tide over the slump in the domestic market," Anup Maheshwari, DSP Merrill Lynch Fund Managers Ltd's head (equities), told media.
DSP Merrill Lynch last week launched its World Gold Fund to invest the proceeds in gold mining firms. This would be soon followed by UTI Mutual Fund, which is planning to launch its "Global Navigator Fund" that would invest abroad.
Indian stock market is giving one of the best returns in the world, but freak incidents like the one on Friday when its benchmark Sensex crashed by 542 points is leaving investors jittery on where to park their money.
The trend of launching global funds in India has gained momentum after Reserve Bank of India eased norms for mutual funds' investment in international markets.
As per current guidelines, mutual fund industry can invest up to USD four billion in the overseas market. RBI had in April this year raised the limit of overseas investments by domestic mutual funds from the earlier USD three billion.
"We will be shortly launching Emerging Market Fund and will be able to collect more money with RBI raising the ceiling for MFs," HSBC Asset Management company's CEO Sanjay Prakash had said after RBI raised the cap.
The existing funds include Kotak Global Emerging Market Fund, Sundaram BNP Paribas Global Advantage Fund, Principal Global Opportunities Fund, Fidelity International Opportunities fund and Templeton India Equity Income Fund.
Among these funds, some can invest up to 100 per cent in global assets. However some funds invest up to 85 per cent in overseas assets and around 15 per cent in domestic assets.
But there is a word of caution for overseas investments as the fund performance is associated with the political climate, economic philosophy and level of corruption.
The Kotak Global Emerging Market Fund invests in emerging markets stocks, while Sundaram BNP Paribas Global Advantage Fund provides exposure to commodities and real estate segment besides investing in equities.
However, lack of clarity on issues like taxation are holding up Indian mutual funds' plan to enhance exposure in overseas equity markets. Besides, a preference for the far attractive domestic market is also acting against the growth in this segment, some market observers believe.
While DSP Merrill Lynch and Kotak MF have launched their global funds last week, one of the country's biggest fund houses UTI MF and HSBC Asset Management Company are also planning to launch new schemes that would invest overseas.
Besides, there are various schemes from Sundaram BNP Paribas, Principal MF, Fidelity International and Franklin Templeton that provide an opportunity to Indian investors to get an exposure to global markets.
Market observers say despite significant gains in domestic market, there have been bouts of volatility and a diversified portfolio spread across the boundaries could be the best bet for investors. This helps to reduce overall investment risk as a decline in one market could often be offset by a rise in another, they said.
"Investment in overseas markets provides a hedging mechanism for investors to tide over the slump in the domestic market," Anup Maheshwari, DSP Merrill Lynch Fund Managers Ltd's head (equities), told media.
DSP Merrill Lynch last week launched its World Gold Fund to invest the proceeds in gold mining firms. This would be soon followed by UTI Mutual Fund, which is planning to launch its "Global Navigator Fund" that would invest abroad.
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Indian stock market is giving one of the best returns in the world, but freak incidents like the one on Friday when its benchmark Sensex crashed by 542 points is leaving investors jittery on where to park their money.
The trend of launching global funds in India has gained momentum after Reserve Bank of India eased norms for mutual funds' investment in international markets.
As per current guidelines, mutual fund industry can invest up to USD four billion in the overseas market. RBI had in April this year raised the limit of overseas investments by domestic mutual funds from the earlier USD three billion.
"We will be shortly launching Emerging Market Fund and will be able to collect more money with RBI raising the ceiling for MFs," HSBC Asset Management company's CEO Sanjay Prakash had said after RBI raised the cap.
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The existing funds include Kotak Global Emerging Market Fund, Sundaram BNP Paribas Global Advantage Fund, Principal Global Opportunities Fund, Fidelity International Opportunities fund and Templeton India Equity Income Fund.
Among these funds, some can invest up to 100 per cent in global assets. However some funds invest up to 85 per cent in overseas assets and around 15 per cent in domestic assets.
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But there is a word of caution for overseas investments as the fund performance is associated with the political climate, economic philosophy and level of corruption.
The Kotak Global Emerging Market Fund invests in emerging markets stocks, while Sundaram BNP Paribas Global Advantage Fund provides exposure to commodities and real estate segment besides investing in equities.
However, lack of clarity on issues like taxation are holding up Indian mutual funds' plan to enhance exposure in overseas equity markets. Besides, a preference for the far attractive domestic market is also acting against the growth in this segment, some market observers believe.
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