Indians invest 56% more in foreign stocks and bonds even as overseas remittances fall: What's driving the shift?

Indian investors are increasingly looking beyond domestic markets to diversify their portfolios, with overseas investments in equities and debt securities rising sharply even as overall outward remittances decline. RBI data shows that remittances for foreign equity and debt investments jumped 56.1% year-on-year to $2.7 billion in FY26, highlighting growing interest in international assets.

The increase comes despite total outward remittances under the Liberalised Remittance Scheme (LRS) falling 2% to $28.98 billion in FY26, from $29.56 billion in FY25. Overall remittances have declined for two consecutive years after peaking at $31.74 billion in FY24.

Why are Indians investing more abroad?

Deepak Shenoy, founder and CEO of Capitalmind, believes rising overseas investments reflect greater financial maturity rather than excessive capital outflows.

"Recently, there’s been some pickup in equity investments abroad, but it’s still too tiny to matter," Shenoy wrote on X, pointing to the $2.7 billion invested during FY26.

He suggested that growing interest in overseas stocks may partly reflect the rally in international equities and constraints on fresh investments through Indian mutual funds.

Indian investors seeking international exposure may be attracted to global technology companies, particularly those operating in artificial intelligence, semiconductors and digital services. However, RBI's aggregate LRS data does not establish which sectors or companies received these investments.

Shenoy argued that Indian households should be able to participate in wealth creation beyond domestic markets.

"You can’t expect us to own foreign-made phones, but to not participate in the profits those companies make by selling us those phones," he wrote.

How can Indians invest in overseas markets?

Under the RBI's LRS framework, resident individuals can remit up to $250,000 per financial year for permitted overseas transactions, including investments in foreign equities, debt securities and property.

Investors generally have two routes to international equity exposure.

The first involves directly purchasing overseas stocks and ETFs through platforms providing access to foreign markets. Such investments typically involve foreign currency conversion, brokerage charges and overseas custody arrangements.

The second involves investing in India-domiciled international mutual funds or ETFs, which provide exposure to overseas markets without requiring investors to remit money individually.

However, overseas investment limits applicable to Indian mutual funds can restrict fresh subscriptions to certain international schemes.

What about taxes and currency risks?

Direct overseas investments may attract tax collected at source (TCS) on LRS remittances, subject to applicable thresholds and rules. TCS is generally adjustable against the investor's final income-tax liability.

Capital gains taxation also differs between directly held foreign securities and India-domiciled international funds. Investors must consider holding periods, applicable tax rates and reporting obligations, including foreign asset disclosures where required.

Currency movements introduce another risk. Rupee depreciation can increase the rupee value of dollar-denominated investments, while appreciation can reduce returns.

Is overseas diversification worth considering?

Shenoy noted that overseas property investments also increased 63.8% to $529 million in FY26, suggesting broader interest in international assets.

For investors, foreign equities can offer geographic diversification and access to businesses unavailable in Indian markets. However, overseas exposure should complement domestic investments rather than replace them.

The sharp increase in foreign investments indicates changing portfolio preferences, but investors must weigh diversification benefits against valuations, currency fluctuations, taxation and transaction costs before allocating money abroad.