Investing in Companies Outside India: A Smart Diversification Play

In today’s fast-evolving financial world, portfolio diversification is no longer just a defensive tactic; it is a strategic necessity. Indian investors who restrict their capital solely to domestic equities expose themselves to concentrated risks such as policy changes, economic slowdowns, currency volatility and sector-specific downturns. While India continues to offer long-term structural growth, many of the most transformative investment opportunities of this decade, particularly in Artificial Intelligence (AI), Electric Vehicles (EVs), semiconductors and advanced digital infrastructure, are being led by companies headquartered outside India.

Global giants such as Nvidia, Tesla, Microsoft, Alphabet, Amazon and BYD are shaping the future of AI computation, autonomous mobility, cloud platforms and next-generation hardware. India currently has limited pure-play leaders in advanced AI hardware or deep EV technology. Therefore, for investors seeking exposure to disruptive global megatrends, investing outside India is not speculation; it is strategic positioning. The fundamental question now becomes: how can an Indian investor start investing in listed companies outside India, especially in high-growth areas like AI and EVs?

How to Start Investing in Listed Companies Outside India

There are two broad routes through which Indian investors can gain exposure to international equities: the indirect route and the direct route.

Indirect Route: Mutual Funds and ETFs

The indirect route allows investors to gain overseas exposure without opening a foreign trading account. Indian Mutual Funds and ETFs pool investor capital and invest in global stocks or overseas funds. Fund houses such as Motilal Oswal, ICICI Prudential, DSP, Mirae Asset and Franklin Templeton offer schemes focused on global markets, US technology stocks and thematic overseas sectors.

ETFs, like mutual funds, invest in a basket of securities, but unlike mutual funds, they trade on exchanges like stocks. US-focused ETFs or international Funds of Funds (FoFs) provide exposure to AI, tech, metals and energy companies abroad. However, it is important to note that many Indian mutual funds investing in overseas markets have temporarily stopped accepting new inflows after hitting SEBI’s industry limit of USD 7 billion for international investments. Until this cap is raised, this route may remain partially restricted for new investors.

Direct Route: Investing in US Markets

The direct route enables investors to buy shares of international companies directly. This requires awareness of India’s Liberalised Remittance Scheme (LRS), under which residents can remit up to USD 2,50,000 per financial year for investments abroad. At an approximate exchange rate of Rs 89 per dollar, this works out to around Rs 2.22 crore annually. Historically, investing directly in US equities was costly and cumbersome, involving high fees, international bank accounts and cumbersome processes suitable mainly for HNIs. Today, two modern pathways have simplified the process:

One option is the NSE IFSC platform at GIFT City, Gujarat. It allows Indian investors to trade depository receipts of US stocks such as Tesla, Nvidia, Alphabet, Apple and Microsoft. These receipts are backed by actual stocks held by HDFC Bank IFSC Banking Unit, making the process transparent while eliminating the need to open offshore accounts. The second option involves new-age Indian fintech platforms partnered with US brokers. These platforms offer commission-free trading, zero maintenance fees and easy account setup, enabling even retail investors to access US markets efficiently.

Taxation on overseas equity is governed by the India-US Double Tax Avoidance Agreement (DTAA). Capital gains are taxed only in India, with long-term classification at 24 months. Dividends attract 25 per cent US withholding tax, which can be claimed as a credit while filing Indian tax returns.

Overseas Funds Delivering Up To 110 per cent Returns in One Year

For investors unwilling or unable to invest directly, overseas mutual funds and ETFs provide powerful alternatives. Some funds have delivered extraordinary one-year returns, offering both diversification and high growth. Below are three standout performers that investors should closely track. All the mutual funds discussed are Direct-Growth plans, which investors are advised to consider while investing.

DSP World Gold Mining Overseas Equity Omni FoF

Launched in January 2013, this fund focuses on global gold mining companies and related industries. It invests in overseas ETFs and funds involved in the mining and metals sectors. Over the past year, it delivered a staggering 106.89 per cent return, one of the highest among overseas funds. Three-year annualised return stands at 42.11 per cent, while five-year returns are approximately 20.28 per cent. The NAV as of November 2025 was Rs 46.94 with assets under management of Rs 1,498 crore. The fund is benchmarked to the FTSE Gold Mines Index and carries a very high risk rating.

Its volatility, as captured by standard deviation, is 28.13, higher than the category average, while the Sharpe ratio of 1.3 suggests relatively strong risk-adjusted returns. The expense ratio is 1.64 per cent, significantly above the category average, reflecting its active global mandate. This fund is suited for risk-tolerant investors seeking thematic exposure to gold and mining on a global scale.

Mirae Asset NYSE FANG+ ETF FoF

This fund invests in the NYSE FANG+ Index, which includes leading tech companies such as Meta, Amazon, Netflix, Alphabet, Microsoft, Nvidia and Tesla. It delivered 49.91 per cent returns in one year and 336.28 per cent over three years, with annualised returns of nearly 67.5 per cent. The AUM stands at Rs 2,463.40 crore. It carries a very low expense ratio of 0.07 per cent, making it cost-efficient compared to peers. The standard deviation is 25.12, indicating above-average volatility, but a Sharpe ratio of 1.97 reflects strong risk-adjusted performance. This fund is ideal for investors seeking long-term exposure to global technology leaders shaping AI, cloud computing and digital innovation.

ICICI Prudential Strategic Metal and Energy Equity FoF

This fund focuses on global metal and energy companies, investing via the First Trust Strategic Metal and Energy UCITS Fund. It delivered 37.04 per cent returns over the past year and offers 17.12 per cent annualised three-year returns. AUM stands at Rs 114.72 crore, making it comparatively smaller. It carries a very high risk with a Sharpe ratio of 0.56, indicating relatively weaker risk-adjusted returns. While it provides thematic diversification, investors must be aware of the inherent volatility in commodities and energy sectors.

Conclusion: Building a Future-Focused Global Portfolio

Investing in overseas companies, particularly those leading AI and EV development, offers Indian investors a pathway to sustainable portfolio growth and diversification. Whether through mutual funds, ETFs or direct trading accounts, exposure to global megatrends allows investors to future-proof their wealth. However, this strategy suits investors who understand volatility, currency risk, taxation and long-term perspectives. While extraordinary returns such as 106 per cent in one year are enticing, consistency, disciplined investing and strategic asset allocation remain critical. The core lesson is simple: the future of wealth creation lies not just within national borders but in aligning with global innovation hubs shaping tomorrow’s economy. By combining Indian market strength with selective international exposure, investors can build resilient, balanced and growth-oriented portfolios capable of thriving in any market cycle.

Disclaimer: The article is for informational purposes only and not investment advice.