The Indian stock market saw a severe and prolonged sell-off in recent times, beginning in October 2024 and continuing until the end of February 2025. While March witnessed a strong recovery, it was not enough to fully offset the losses incurred in the previous five months. Despite the March rebound, Sensex and Nifty are down 8.17% and 8.88%, respectively, in the last six months. The sell-off has been even more pronounced in broader indices such as the BSE 250 Smallcap Index and the BSE 150 Midcap Index, which have declined by 20% and 16%, respectively, over the same period.
The severity of the equity market plunge can be imagined from the fact that, over the last six months, only three out of 519 equity mutual fund schemes have delivered positive returns. Of these 3 funds, 2 schemes are international mutual funds and one thematic fund.
Here are the 3 standout schemes that managed to withstand the market downturn and provide investors with positive returns.
1. Aditya Birla Sun Life International Equity Fund
Aditya Birla Sun Life International Equity Fund is a global or international equity fund that primarily invests in stocks of companies outside India.
Six-month returns: 2.63%
Launch date: 1 January 2013
Benchmark: S&P Global 1200 TRI
Assets under management: Rs 199 crore
2. Motilal Oswal Business Cycle Fund
Motilal Oswal Business Cycle Fund is a thematic equity mutual fund that follows a business cycle-based investment strategy.
Six-month returns: 2.62%
Launch date: 27 Aug 2024
Benchmark: NIFTY 500 TRI
Assets under management: Rs 1,603 crore
3. Nippon India US Equity Opportunities Fund
Nippon India US Equity Opportunities Fund is an international mutual fund. It invests primarily in equity and equity-related securities of companies listed on US stock exchanges.
Six-month returns: 2.30%
Launch date: 23 July 2015
Benchmark: S&P 500 TRI
Assets under management: Rs 725 crore
(Data source: Value Research)
The international mutual fund category has performed comparatively better than many of its peers. Of 67 international funds, 28 funds have given positive returns with up to 28.34% gains in the last 6 months. Thematic fund categories like banking, energy and PSU have also performed well. So, it’s no surprise that three funds with positive returns in the last 6 months are two international mutual funds and one thematic fund.
Risks and benefits of investing in international funds
Investing in international mutual funds can give you good returns, but they also carry some risks. If you invest in international mutual funds, you get an opportunity to invest in foreign companies by exiting the Indian market. This makes your portfolio geographically diversified and also gives the advantage of getting returns in dollars or other strong currencies. Especially when the value of the rupee falls, you get direct benefit from it. Apart from this, you can invest in fast-growing sectors like technology, healthcare and e-commerce. If there is a recession in the Indian market, investing in foreign markets can help keep your portfolio balanced.
However, it also has some risks. Since this investment is in foreign currencies, the strength of the rupee can affect your returns. Also, global economic crisis, political instability and foreign regulatory changes can also affect your investment. International mutual funds usually charge higher fees and tax rules can also be more complex than Indian funds. Moreover, it may be difficult for Indian investors to track news from the US or European markets due to different time zones.
Risks and benefits of investing in thematic fund
Thematic mutual funds are for investors who want to invest in a particular theme or sector. For example, thematic funds such as technology, green energy, healthcare, digital India can give good returns in the long term. Thematic funds give investors an opportunity to take advantage of expertise in emerging sectors and if a sector performs well, investors can get big profits.
Thematic funds also carry higher risk. These funds focus on only one or a few sectors, which reduces diversification in investment. If that sector goes into recession, investors can suffer huge losses. Apart from this, thematic funds are dependent on market cycles, so it is important to start investing at the right time and exit at the right time.
Summing up
If you want to invest in international mutual funds, you should keep in mind that it may be affected by currency risk and foreign market volatility. On the other hand, thematic funds are suitable for those who want to invest in a particular sector for a long period and are willing to take higher risks. Before investing in any fund, it is important to keep in mind your risk capacity, investment period and market trends.