India’s overseas investment rush

INDIAN investors are expected to look increasingly beyond their home market as disappointing domestic equity returns, a weakening rupee and growing appetite for artificial intelligence (AI)-related stocks drive more household savings overseas.

With global markets offering exposure to sectors and companies that remain under-represented in India, asset managers are stepping up efforts to capture the growing demand for international investments.

According to Reuters, some of India’s largest money managers are launching a flurry of overseas investment funds through Gujarat International Finance Tec-City (GIFT City), the country’s tax-neutral financial hub, to tap record amounts being channelled abroad by domestic investors.

At least half a dozen such funds have been launched over the past six months, including the JioBlackRock Advantage World Equity Fund, introduced last month by a joint venture between Mukesh Ambani’s Jio Financial Services and BlackRock, the world’s largest asset manager, the newswire highlighted.

Other established players, including HDFC Asset Management, Parag Parikh and Aditya Birla Sun Life, have also entered the space, reflecting how overseas exposure is becoming a more permanent feature of Indian household portfolios, it added.

“Over the last two years, we’ve seen a clear increase in demand for global assets,” said Shobhit Mathur, co-founder of money manager Ionic Wealth.

“Investors are no longer looking at overseas exposure as a tactical allocation but increasingly as a permanent part of portfolio construction,” he told Reuters.

Evident shift

The shift is evident in the latest investment figures.

International investments by Indian individuals, either directly or through funds, more than doubled year-on-year to nearly US$2.3bil in the first half of 2026, according to Reserve Bank of India (RBI) data cited by Reuters.

The pace puts overseas investments on track to surpass the record US$2.65bil registered for the whole of 2025.

India has more than 130 million retail stock investors, but a growing number are diversifying beyond domestic equities after a prolonged period of underperformance. Their search for returns is taking them from Wall Street to less conventional destinations, including Kazakhstan and Mongolia.

For some, the shift has been more than a modest portfolio adjustment.

Ankit Khandelwal, a 41-year-old investor from Kota in the western state of Rajasthan, has been buying global exchange-traded funds (ETFs) and shares in companies listed in overseas markets.

“It began as an experiment but since then better returns overseas and persistent rupee weakness has led me to grow the overseas portion of my portfolio to over 60% from about 5% in early 2025,” he told Reuters.

Khandelwal, an import and export adviser to companies, said he understood businesses in the metals, mining and energy industries worldwide, giving him an additional reason to seek opportunities outside India.

The weakening domestic investment climate has been an important factor behind the growing interest in foreign assets. India’s rupee hit a record low this year, while its equity market faced sustained selling by institutional investors.

The economy has also come under pressure from higher energy costs linked to the Iran war.

High valuations and the limited availability of AI-related stocks in the domestic market have further reduced the appeal of local equities for investors seeking exposure to one of the biggest global investment themes.

Changing sentiment

The change in sentiment is also showing up in domestic trading activity. New retail trading account openings for local investments fell by a quarter to 33 million in the financial year ended March 2026, according to data from Indian depositories.

The growing appetite for overseas assets, however, is running into regulatory restrictions.

Under the RBI’s rules, Indian mutual funds are subject to a cumulative overseas investment ceiling of US$7bil, with an individual asset manager limited to US$1bil.

With these limits almost exhausted, fund managers have struggled to create fresh units for overseas investments despite rising demand.

GIFT City is emerging as an important alternative because overseas investment funds established there by domestic asset managers are not subject to the same RBI investment ceilings.

The arrangement is allowing fund houses to expand their international offerings while retaining access to India’s large retail investor base. It also provides investors with a more structured route to diversify their holdings across global markets.

Meanwhile, demand for existing overseas investment products continues to build despite the regulatory constraints.

Assets under overseas fund-of-funds schemes increased 42% year-on-year to 488 billion rupees in September, while the number of investors registered for these products rose 34% to nearly two million, according to the Association of Mutual Funds in India.

The shortage of available investment avenues has even pushed some overseas ETFs to trade at substantial premiums to the net asset values of their underlying portfolios.

Reuters reported that the Motilal Oswal Nasdaq Q50 ETF traded at premiums of between 65% and 80% at certain points in September. Some overseas ETFs offered by Mirae Asset also commanded premiums ranging from 27% to 58%.

Such price distortions highlight the imbalance between investor demand and the supply of products providing access to international equities.

Next phase

Beyond fund houses, discount brokers are also positioning themselves for the next phase of overseas investing, Reuters pointed out.

It noted that Groww, Zerodha and Angel One launched fractional investing platforms last month, allowing retail investors to buy portions of overseas shares rather than having to purchase whole units.

The development could make expensive US-listed stocks more accessible to smaller investors, particularly those seeking exposure to global technology and AI companies.

India is not alone in facing the challenges associated with rising retail capital outflows. Similar trends are emerging in other markets, including China, where regulators have stepped up scrutiny of unofficial channels used to transfer money overseas.

For Indian policymakers, the trend presents a delicate balancing act.

Authorities have spent years encouraging households to shift savings away from traditional holdings such as property, gold and bank deposits towards domestic equities.

A sustained increase in overseas investing could complicate those efforts by directing a larger share of household capital towards foreign markets.

However, Indian authorities are not currently considering measures to restrict these investment flows, three people at Indian regulators told Reuters.

The authorities remain cautious about the money moving abroad, although neither the market regulator nor the RBI responded to Reuters’ requests for comment.

Industry executives, meanwhile, are urging investors to distinguish between genuine portfolio diversification and chasing short-term gains.

“Indian markets have not given returns and overseas markets are looking attractive,” said Swarup Mohanty, chief executive of Mirae Asset Investment Managers.

“If you want to invest for diversification then it’s fine, but investing purely to chase short-term returns is worrying,” he told Reuters.