international mutual funds
After a strong run in 2025, when international equity funds delivered average returns of around 27 percent, global markets are firmly back on investors’ radar. US and Japan-led equities emerged among the top performers, and with expectations of moderate yet relatively stable returns in 2026, international funds are increasingly being viewed as a diversification play rather than a tactical, return-chasing bet.
However, access to overseas markets remains constrained due to regulatory limits,which is capped at an industry-wide aggregated cap of $7 billion and and each fund house has a limit of $1 billion. Over the past few years, several international mutual fund schemes had either stopped accepting fresh investments or restricted inflows after fund houses hit their overseas investment limits.
Against this backdrop, a select set of international funds continue to accept fresh lump-sum investments and SIPs, offering Indian investors a limited opportunity to add global exposure. The availability of these schemes depends on the remaining overseas investment headroom with their respective asset management companies.
How did international funds perform in 2025?
International equity funds delivered a mixed but improving performance in 2025, with returns largely shaped by regional and sectoral trends.
According to ACE Mutual Fund data, as of December 30, 2025, top 10 international funds delivered one-year return of around 49 percent, riding on themes such as technology, artificial intelligence, consumer spending, semiconductors and natural resources.
The DSP World Mining Overseas Equity Omni FoF emerged as the best performer, generating 79 percent in a year and 18 percent over three years. It was followed by ICICI Pru Strategic Metal and Energy Equity FoF which benefited from rise in metal prices. Broader US-focused strategies also did well. Mirae Asset NYSE FANG+ETF FoF returned 23 percent in one year and 64 percent in three years.
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According to Thomas Stephen, Director & Head Preferred, Anand Rathi Share and Stock Brokers, US-focused funds emerged as the strongest performers. “This was supported by robust earnings growth in technology, semiconductors and AI-led businesses, along with resilient economic growth,” he said.
Nasdaq-100 has given a return of 20 percent in one year, while Nifty 50 has given a return of 12 percent in 2025.
Japan also stood out during the year, aided by corporate governance reforms, improving return ratios and a weaker yen that boosted export competitiveness. European markets posted moderate gains, with value-oriented sectors such as financials and industrials performing better amid slower growth and geopolitical uncertainties.
In contrast, China and broader emerging markets lagged, weighed down by weakness in China’s property sector, subdued consumer demand and uneven policy support. Edelweiss Greater China Equity Off-shore Fund gave a return of 37 percent in 2025.
Should investors consider investing now?
Experts suggest that international equities should primarily be used as a diversification tool rather than a return-chasing strategy.
“At current market levels, a staggered investment approach through SIPs is preferable to lump-sum allocations, particularly in markets like the US where valuations remain elevated,” Stephen said.
He added that investors should maintain a long-term allocation discipline, with overseas equities forming about 10-20 percent of the equity portfolio, rather than trying to time global markets.
Outlook for international markets in 2026
The outlook for global equities in 2026 will depend on factors such as the trajectory of US interest rates, sustainability of corporate earnings, especially in technology and AI-linked sectors, and evolving global trade dynamics.
Stephen noted that while easing inflation and gradual rate cuts could support valuations, elevated debt levels and ongoing geopolitical risks are likely to keep volatility higher than historical averages. “This points to moderate but relatively stable return expectations,” he added.
Among global markets, the US appears better positioned for 2026 due to its leadership in innovation, strong corporate balance sheets and better earnings visibility, despite higher valuations.
Emerging markets excluding China could also benefit from easing financial conditions and supply-chain realignment, though outcomes are expected to remain country-specific.