Whalesbook
Global Equities: A Supporting Role
Nisreen Mamaji, Founder of MoneyWorks FS, guides Indian investors to thoughtfully integrate international investments into their portfolios. Global mutual funds offer a valuable way to diversify beyond the Indian market and hedge against currency fluctuations, especially the U.S. dollar's appreciation. However, Mamaji stresses these should enhance, not replace, existing domestic equity holdings. This advice comes as the Indian equity market, measured by the BSE Sensex, has seen a 7.15% decline year-over-year, trading at 75160 points on May 21, 2026.
Passive Funds as an Entry Point
For investors new to international markets, Mamaji recommends starting with passive funds. These funds provide broad exposure to global economic trends, making entry simpler without the need for stock selection in unfamiliar territories. This strategy helps investors gain diversification benefits while navigating potentially high valuations in the Indian market, which has underperformed global peers in 2026 with benchmarks down 10-12%.
Thematic Investment Opportunities
Mamaji highlights key themes attracting global investor interest, including artificial intelligence (AI), healthcare, semiconductors, and clean energy. These areas are especially relevant in the current volatile market. Global AI spending is projected to reach $2.59 trillion in 2026, a 47% increase year-over-year. The healthcare sector is also seeing substantial investment, driven by trends like AI-powered diagnostics and value-based care. In clean energy, global investment hit $2.2 trillion in 2025, though rising energy demand, partly from AI and data centers, poses a challenge to decarbonization goals.
The Indian Market Context
India has seen sustained Foreign Portfolio Investor (FPI) outflows in 2026, totaling ₹2.2 lakh crore by mid-May, surpassing the ₹1.66 lakh crore outflow for all of 2025. These outflows are linked to global economic uncertainties, geopolitical tensions, volatile crude oil prices, and a strong U.S. dollar making developed markets more attractive. The USD to INR exchange rate has weakened significantly, trading at 96.1290 on May 21, 2026, an 11.81% drop over 12 months. While this currency depreciation may benefit international investments, it underscores challenges for the domestic equity market. Despite these issues, domestic institutional investors (DIIs) have offered support, and some analysts find Indian equity valuations attractive after the recent correction. However, overall investor sentiment remains cautious, favoring large and mid-cap stocks for better valuation comfort.
Global Investment Performance and Outlook
International mutual funds have shown strong performance, with global equity funds averaging a 55.2% return in the past year and a 6.7% annualized return year-to-date in 2026. Funds focused on U.S. equities, like the Motilal Oswal Nasdaq 100 FoF and Kotak US Specific Equity Passive FoF, have notable 5-year CAGRs. While international diversification provides access to global themes and potential currency gains, investors should maintain well-diversified portfolios and adhere to asset allocation strategies. Inflows into global feeder funds reached a record $4 billion in March, indicating growing interest in overseas markets.