While the Indian markets seem to be buckling under political and inflationary pressure, turning their attention towards the international markets seems to have paid off for mutual fund houses. According to data on mutualfundsindia.com, in the last one month, out of the 15 top performing equity mutual fund schemes, 14 are offshore schemes investing in everything from international real estate to commodities to international mutual funds.
The top performer was Mirae Asset China Advantage Fund, which has given returns of 5.4 per cent, followed by DWS Global Thematic Offshore Fund (investing in international mutual funds) with 4.8 per cent returns and Hang Seng BeEs with 4.6 per cent.
During the same period, BSE Sensex gave returns of negative 8.15 per cent. The schemes investing in diversified Indian equity have generated returns of lower than 2 per cent, except Peerless Short Term Fund which has seen a return of 3.5 per cent.
Better than expected recovery in global markets, particularly those of the US markets, has been one of the reasons for these funds displaying better performance, say analysts. There has also been a rise in inflows into these funds.
On the contrary, Indian markets have disappointed investors. Even while the GDP growth rate in India hasn't slowed down, inflationary and political risks have led to some amount of speculation among international investors. FII inflows have been adversely affected leading to negative returns.
“The Indian market has corrected sharply by as much as 13 per cent in recent times. In dollar terms, the Indian market has given returns of -8 per cent, while Hang Seng has given 5 per cent returns during the same period,” said Mr Gopal Agrawal, Deputy CIO & Head – Equity, Mirae Asset Investment Managers, Mirae Asset Global Investments (India).
“The interest in overseas markets will increase and will be spread across regions,” he added.
However, analysts believe that this a short-term phenomenon as sentiments will soon turn positive. Offshore funds do not have a sizeable base in India, just about Rs 3,000 crore in the Rs.6.74 lakh crore mutual fund industry. Sustaining an interest in these schemes will depend on the returns generated by them in the long-term.
“Nobody looks at six-month returns for investment decisions anymore,” said Mr Arvind Bansal, Vice-President and Head – Multi Manager Investments, ING Investment Management. “For these funds to increase their investment corpus, the international markets will have to generate competitively better or equally good returns based on a risk-adjusted basis.”