Here’s how you can invest in global stocks (2024)

Love global stocks? You will soon be able to: own global stocks directly. NSE International Exchange (NSE IFSC) and BSE International Exchange (INX) have announced that trading will commence soon on their IFSC platforms in GIFT City, Ahmedabad. Investors will be able to invest / trade in a fraction of a stock - this will be possible as it will be in the form of depository receipts (DR) of the stocks. Investors can hold the DRs in their demat account opened in GIFT City. Investments in these will be part of the Liberalized Remittance Scheme (LRS) of USD 250,000 per financial year.

While this is an exciting development, the avenue of mutual funds has been available to investors for quite some time. The mutual fund-route has many advantages. One reason is to diversify your exposure to other economies / markets. The other reason is to benefit from Rupee depreciation: while you invest, the exchange rate is at a certain level and when you redeem, if Rupee has depreciated against say USD, you get a higher converted value.

The benefits of taking the direct route are that costs are lower as the transaction cost is incurred one-time for the tenure of the holding and if you are a savvy investor, you have control over your portfolio. But mutual funds score on this front as well. The portfolio construction in terms of stock selection, research and on-going management is taken care of by professional fund managers. The portfolio of the fund is diversified, as decided by the fund manager within the mandate of the fund, hence you don’t have any headache like in direct stocks.

The execution of your investments / redemptions and tracking your portfolio is relatively easier through the MF route. For retail investors, it is possible to make small ticket SIPs of the size of say Rs 5,000. On the other extreme, MF investments not being subject to the LRS limit, there is no restriction on large ticket size. USD 250,000 per year, which is approx. Rs 1.87 crore per year, is not a limitation for most investors, but may be for some - especially if the limit is required for other remittances.

The only flipside of MFs is that the recurring expenses, for running the fund, are charged every year. This is the cost of the ‘package’ offered by MFs; you just have to buy units of the fund.

Within the mutual fund space, there are many funds or fund-of-funds (FoFs are MF Schemes investing in one or more other MF Schemes) or ETFs (Exchange Traded Funds you can buy/sell at the Stock Exchange) available in India, investing abroad. There are multiple funds available; some are focused on the US market, some on emerging markets while some have a more ‘global’ approach.

Some of the funds or FoFs focusing on the US market are (1) Franklin India Feeder - U.S. Opportunities Fund is a FoF with a track record of more than 9 years (2) ICICI Prudential US Bluechip Equity Fund has a track record of 9 years (3) Mirae Asset NYSE FANG Plus ETF is a recent launch and (4) Motilal Oswal Nasdaq 100 ETF has a history of more than 10 years.

Some funds focusing on Asia or emerging economies are (1) Edelweiss Greater China Equity Offshore Fund with a history of more than 12 years (2) Franklin Asian Equity Fund with a track record of more than 13 years and (3) PGIM India Emerging Markets Equity Fund (FoF) with a track record of almost 14 years.

Some of the funds with a ‘global’ portfolio approach are (1) Axis Global Equity Alpha FoF which is a relatively recent launch (2) ICICI Prudential Global Stable Equity Fund (FoF) with a track record of almost 8 years (3) ICICI Prudential Global Advantage Fund FoF with the portfolio combining global and Indian equities, with a track record of almost 2 years (4) Invesco India Feeder - Global Equity Income Fund with a history of more than 7 years and (5) PGIM India Global Equity Opportunities Fund with a history of more than 10 years.

Decide your overall allocation to equity, within that to domestic and global equity, and go ahead.

(The writer is a corporate trainer and author)

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