Indian stock investors chase global stocks amid muted domestic returns

Poor stock market returns at home appeared to have pushed many Indian investors to diversify geography-specific risk and reduce home-market bias. The trend is being observed amid the artificial intelligence (AI) theme being playing out globally, driven by what is being termed as “the mother of all AI capex cycles” in the US. Stocks have surged across Wall Street, while markets such as Korea and Taiwan more than doubled in less than a year on AI-driven semiconductor demand, leaving most domestic investors high and dry.

"The diversification logic has finally hit home. India's stock market accounts for roughly 4 per cent of global market capitalisation, while the United States commands around 50 per cent. For Indian investors, staying purely domestic effectively means betting on less than a twentieth of the world's listed wealth. On the other hand, the US, for instance, is where the world's most influential businesses sit — Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, Tesla and these have no real Indian equivalents," Viram Shah, Co-founder & CEO at Vested Finance told Business Today.

Domestic fund managers offering fund of funds (international funds) to Indian investors managed Rs 38,287 crore in assets at March-end, latest monthly data available with AMFI showed. Besides, Indians directly invested $2.2 billion in global equities and debt between April 2025 and February 2025 in the first 11 months of FY26, up 60 per cent YoY, Bloomberg said in report quoting the RBI data. 

Investing in global stocks

He noted that the access to global equities has expanded dramatically over the last 18 months, with new avenues emerging such as NSE IX at GIFT City. In February 2026, NSE International Exchange launched a platform from GIFT City that lets Indian retail investors and NRIs directly buy US stocks, with plans to expand to 30 global markets by end-2026, fractional trading  KYC in under a minute, and no demat account required. The ecosystem is governed by IFSCA and operates within Indian regulatory infrastructure — a key comfort factor.

Shah said direct LRS investing via fintech platforms has been other way of investing for a while. Indian residents remit up to $250,000 per financial year for investments abroad, with fractional shares enabling tickets as small as $1.

He also cited Unsponsored Depository Receipts (UDRs) on NSE IFSC, where each receipt represents a fraction of one US share — for example, 25 or 50 receipts equal one share — backed by underlying shares held by a custodian overseas. The universe currently covers around 50 US large-caps including Apple, Amazon, Tesla, Microsoft and Meta.

Other options include outbound AIFs at GIFT City for HNIs willing to commit larger tickets with lock-ins and UCITS ETFs (Ireland/Luxembourg domiciled), which are increasingly used by investors to manage US estate-tax exposure. Investors are also investing in funds managed by likes of BlackRock, Fidelity, JP Morgan and Morgan Stanley, Shah said.

Behind India's underperformance 

With no clear AI plays in India, MSCI India has underperformed MSCI EM over the last 12 months, with India's share in the global market capitalisation lying near a three-year low of 3 per cent. In fact, Sensex and Nifty have declined about 8 per cent each from September 2024 peaks against 30–150 per cent rise in global markets.

A tepid earnings growth has been a concern for India. Global markets are pricing in 20-40 per cent earnings growth against India’s 18 per cent EPS growth. "India’s lower exposure to AI hardware and the narrow, concentrated nature of the global AI rally have limited participation, thereby overstating overall market weakness," MOFSL said.

 Its no brainer Indian interest in global stocks has picked up.

International funds double investor money

International funds as a mutual fund category delivered 27.50 per cent returns compounded annually in the past three years against a 14 per cent return delivered by domestic equity largecap funds. In the last one year, international funds delivered 55 per cent returns against a muted 3 per cent return for Equity largecaps category. 

Schemes such as Nippon India Taiwan Equity (up 237 per cent), Mirae Asset Global Electric & Autonomous Vehicles (up 113 per cent), DSP World Gold Mining Overseas Equity (up 112 per cent) in fact more than doubled investor money in the past one year. Direct investing in US stocks too has seen uptick. 

In the case of India, foreign investors are pulling money out of Indian markets amid a sharp depreciation in rupee. They have sold Rs 2,06,180 crore in domestic equities in 2026 so far, in addition to Rs 1,66,286 crore outflows in 2025, leaving Indian markets rely soley on domestic flows via mutual funds.  

Rupee tailwind

For Indian investors, the rupee tailwind is doing quiet but powerful work. Between 2015 and 2025, the rupee weakened by about 42 per cent against the dollar, and in 2025 the rupee depreciated around 5.2 per cent year-to-date, making it the weakest major Asian currency that year.

"If the S&P 500 returns 10 per cent in USD and the rupee falls 3 per cent, the effective INR return reaches approximately 13.3 per cent — this currency tailwind has added 3-4 percentage points annually to US investment returns for Indian investors over the past decade," Shah said.

Sensex and Nifty slipped up to 4 per cent in the past one year compared with 20-30 per cent surge for US benchmarks S&P500 and Dow Jones Industrial Averages, and 100-190 per cent returns by markets across Korea and Taiwan, riding on AI theme.