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In this article, we have highlighted that the earnings forecasts of many global markets are expected to reach all-time highs in the next two years. The anticipated earnings projections could translate into equity markets reaching record high levels. This could translate into a very good opportunity for investors in India to add Global funds in their portfolio.
Global Recovery
Chart 4: Global funds available to Indian Investors
It can be seen from the above table that there are 9 funds which invest in diversified global equities and investors can choose from these funds. However before investing in global funds, investors should keep in mind that from the taxation perspective all these funds are treated as debt funds i.e., if an investor remains invested in the fund longer than a year he/she will be charged at the rate of 10% without indexation and 20% with indexation on the gains and if he/she stays invested for less than a year, he/she will be taxed as per his marginal tax bracket. Also, apart from market risks, which are inherent in all equity linked products, the global funds carry foreign exchange (currency) risk. The fund effectively makes a loss if the Indian Rupee appreciates against underlying foreign currency/currencies and vice versa. Moreover, the track record of the funds has not been very encouraging and most of that are also concentrated on emerging markets. Conclusion Global Funds are still at nascent stage in the Indian Mutual Fund industry and Assests Under Management (AUM) is very small so it is evident that these funds are still not widely accepted by Indian investors. In the current scenario, we see that there are good investments opportunities in global markets as earnings of global companies are expected to increase substantially. Despite this, the positive sentiments are shrouded with apprehensions of a double-dip recession and slow global recovery. Hence, we believe that this is an opportune time to add some exposure to global funds as it helps in bringing geographical diversification and also, has the potential to earn better returns over next few years. Overall, we feel that moderate and aggressive risk appetite investors can have a 5% to 15% of their portfolio in global funds from an asset allocation perspective.
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Nikhil Kothari is Research Analyst with iFAST Financial India Pvt Ltd |
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Disclaimer: iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's scheme information document including statement of additional information. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer on the website.Please read our disclaimer in the website. |
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