How Indian investment overseas is gathering momentum

Indian investors couldn’t buy SpaceX shares in the rocket and satellite company’s June 2026 IPO; US stock market regulations kept them out.

When the company, owned by Elon Musk, made a spectacular debut on NASDAQ on June 12 after raising $75 billion in history’s biggest share sale at a valuation of $1.77 trillion, Indian investors flocked to the stock, accounting for as much as 20% volumes on India-based trading platforms.

Investors have valid reasons to look abroad. They range from the absence of Indian companies that stand to benefit from the boom in AI to underperformance of domestic stock markets over the past couple of years and rupee weakness against the dollar.

Essentially, these investors are seeking diversification and distancing themselves from domestic risk.

“Overseas investing helps reduce single-country risk,” says Vaibhav Shah, Head of Products, Business Strategy and International Business at Mirae Asset. “A portfolio invested only in India remains highly dependent on domestic earnings growth, policy environment, currency movement, interest rates and local market cycles.”

Sure, Indians investing overseas is not a new trend. But it is gathering momentum as investors snap up shares in companies valued at more than $1 trillion such as Meta, Nvidia, Microsoft, Amazon, and Tesla.

RBI data shows that in FY26, overseas equity and debt investments under the Liberalised Remittance Scheme (LRS) rose 56% year-on-year to $2.65 billion. Over the past five years, international equity and debt investments under the LRS have risen 5.6 times. The RBI allows Indians to remit up to $250,000 via LRS every financial year.

Separately, assets under management (AUM) at domestic fund of funds investing overseas increased 83% to `49,430 crore in the year to May 2026. It has risen 111.5% over the past three years, according to AMFI and CRISIL Intelligence.

Diversification in new geographies has benefits. Investors should keep in mind the taxes, compliance norms and operational aspects.

Betting Overseas

The plus points are obvious. While Indian equity markets have delivered nil returns in absolute terms over the past two years (June 2024 to June 2026), overseas markets, including the US, the UK, China, South Korea and Germany, gained 34.7-200%.

Shah of Mirae Asset says Indian market capitalisation is just 4% of the world’s. “Global markets provide access to companies, sectors, and themes that may not be meaningfully represented in India.”

When the rupee depreciates against an international currency, it adds to returns in local currency terms. Over the past 20 years (June 2006-June 2026), the rupee has moved from 46 to 95 against the US dollar. This represents depreciation of around 4% a year. It comes on top of US dollar returns given by the asset. If the rupee appreciates against the dollar, returns would drop.

Does international exposure mean largely investing in US-based companies?

“The US will likely remain the default allocation simply because of depth and liquidity—nothing else really compares in scale,” says Rahul Bhutoria, Director and co-founder of Valtrust, a family office.

“The US alone accounts for 64-65% of global equity market capitalisation (MSCI ACWI weights), with Japan a distant second at around 5%, followed by the UK, China, and Canada in the 2-4% range. That said, there are other segments worth a look,” says Bhutoria.

MSCI ACWI is short for Morgan Stanley Capital International All Country World Index, a flagship global equity benchmark.

International investing is much broader than putting money in US technology stocks, says Niranjan Avasthi, President of Edelweiss Mutual Fund.

“Opportunities exist across Europe, emerging markets, and increasingly China, where valuations in several sectors appear more reasonable after years of underperformance. Investors should think in terms of diversified global exposure rather than concentrating solely on one geography or theme.”

Bhutoria says that investing outside the US means taking a call on other currencies such as the yen, pound or yuan, which may be challenging for the average retail investor.

Making It Work

International investing works best if aligned to personal financial targets and circumstances, experts say. Allocating funds smartly within the overall portfolio is critical.

“Investors should clearly define the purpose of their overseas allocation. It could be for diversification, future overseas expenses, children’s education, foreign currency liabilities, exposure to global themes, or reducing India-specific portfolio risk,” says Shah of Mirae Asset.

Shah suggests three slabs. “An allocation of 5-10% is a practical starting range for many retail investors who want diversification but still have largely India-based goals; 10-20% for investors with higher risk appetite, longer investment horizon, or future foreign-currency needs such as overseas education, travel or relocation; 20%+ selective allocation for sophisticated investors with large portfolios, global liabilities, higher risk tolerance and comfort with tax and reporting requirements,” he says.

Valtrust’s Bhutoria says an allocation of between 5% and 10% is ideal for most retail investors for currency diversification and access to themes India doesn’t offer.

Cautionary Tales

Chasing recent fads and going all-in to take exposure to, say, the US market and technology stocks can backfire on investors. Markets and industries are cyclical, and they could correct or trade sideways for a long time.

For instance, the Nasdaq Composite that hosts all the global technology giants gave zero returns (0%) for 15 years from 2000 to 2015.

“Chasing the rear-view mirror—buying because of recent returns, without registering that the AI capex driving those returns (up 4x since 2022) could slow, or that only 25-29% of S&P 500 stocks are actually beating the index right now—means a plain passive/index bet is really a narrow, concentrated bet dressed up as diversification,” says Bhutoria of Valtrust.

Then there are taxes. Long-term capital gains on international equity funds, stocks or exchange-traded funds (ETFs) are taxed at 12.5% if the holding period is 24 months. Short-term gains are added to income and taxed in the applicable slab. Capital gains are to be paid on rupee returns.

LRS remittances in excess of `10 lakh in a financial year involve a tax collected at source of 20%. Of course, this amount can be set off against overall tax liability when an investor files tax returns, but the TCS amount is collected at the time of the remittance.

Countries such as the US levy a withholding tax of 30% on dividends. Then there is the estate tax.

“Direct stock ownership in a US brokerage account exposes non-resident individuals to US estate tax on death—only a $60,000 exemption on US-situs assets versus the effectively unlimited exemption for US persons, at rates up to 40%,” says Bhutoria.

US-situs investments are those considered to be legally located in the United States.

Then there is the compliance burden. Resident Indians must declare all overseas holdings. Failure to correctly calculate capital gains or declare overseas assets could invite action under the Black Money Act. Investors should check whether the platform or custody agent they use provides an annual statement that makes filing tax returns easy in the Indian context.

Says Bhutoria: “Many international brokers issue statements on a calendar-year (January-December) basis, while Indian returns need the fiscal year (April-March)—this often means manual recalculation from trade-level/monthly statements rather than relying on the broker’s annual summary.”

Sure, despite the compliance and taxation challenges, international investing is worthwhile.

Three Avenues

There are broadly three ways of investing abroad for Indians.

First are Indian mutual funds that invest in overseas mutual funds or ETFs that take exposure to stocks in international markets.

Market regulator Sebi and RBI have set a $7 billion ceiling, with a separate $1 billion for ETFs on the amount Indian mutual funds can invest overseas.

Most of these fund of funds are shut for fresh investments, having hit the threshold. Some allow restricted amounts via systematic investment plans (SIPs).

Fresh investments are allowed only if there is a fall in the value of international investments or if investors redeem amounts from the schemes on offer, a start-stop mode that poses an allocation challenge to investors.

The second mode of investing is direct, by buying stocks, bonds, ETFs and mutual funds. Indian platforms and brokerages such as Indmoney, Vested Finance, ICICI Direct, and HDFC Securities allow citizens to invest directly.

Investors must transfer rupees to a bank that would get converted to US dollars (or the currency used in markets they wish to trade in). When investors sell stocks, ETFs or mutual funds, the proceeds return to them in rupees at the prevailing exchange rate.

The third mode of investing is via Gujarat International Finance Tec-City or Gift City. In simple terms, it is a jurisdiction (located between Ahmedabad and Gandhinagar) that provides financial services to non-residents and resident Indians in any currency other than the Indian rupee.

All entities in the IFSC are regulated by a unified regulator, the International Financial Services Centres Authority (IFSCA). The IFSCA combines the powers of the RBI, Sebi, Pension Fund Regulatory and Development Authority and Insurance Regulatory and Development Authority of India.

Indian investors can open non-rupee accounts in Gift City. Most leading Indian public and private sector banks have branches in GIFT City and opening an account is relatively smooth with regular Know Your Customer norms in place. Amounts can be transferred from the domestic account to the Gift City bank account.

Brokers or platforms such as ICICI Direct, HDFC Securities, Anand Rathi Shares and Stockbrokers, Zerodha Broking, Angel One, Indmoney and Sharekhan have a presence in Gift City via subsidiaries that offer overseas stocks (American mainly) and derivatives as investment options.

Done well, international investing can be rewarding over the long-term for investors. Like with domestic investments, the time horizon must be five years or more. Uninformed choices and chasing momentum can sting.