Indian mutual funds heavily invested in US technology have seen monthly declines of up to 11% following a sharp correction in the Nasdaq. The downturn, driven by investor skepticism over the profitability of massive AI investments, has renewed concerns about portfolio concentration. While many funds remain profitable over a one-year horizon, the volatility highlights the risks of betting on single-sector international themes.
Indian investors holding mutual funds with heavy exposure to US technology stocks have faced a difficult month. As of November 2, 2026, data shows a sharp correction in international equity schemes, particularly those tied to the Nasdaq Composite. This recent volatility follows a difficult October for the US tech index, which dropped approximately 5.3% for the month, including a 2.86% decline on October 30 alone.
The selling pressure is rooted in changing investor sentiment regarding Artificial Intelligence. Large technology companies, which dominate these indices, have been spending billions of dollars on AI infrastructure, such as chips and data centers. However, recent earnings reports from major players like Amazon and Intel have left some investors questioning whether these heavy investments will translate into profit in the near term. This skepticism regarding the 'Return on Investment' (ROI) has triggered a broad retreat in tech-heavy portfolios.
Impact on Tech-Focused Funds
The ripple effect has been most visible in specific 'fund of funds' (FoF) and exchange-traded schemes that mirror US tech performance. Schemes like the Motilal Oswal Nasdaq 100 FoF and the Edelweiss US Technology Equity FoF have reported double-digit monthly declines, with some losses exceeding 11%. These funds are designed to track the performance of US technology giants, meaning that when the Nasdaq falls, the fund’s Net Asset Value (NAV) drops immediately.
In contrast, funds that hold a more diversified 'value' basket, such as the Edelweiss US Value Equity Offshore Fund, have shown more resilience, posting modest gains during the same period. This divergence illustrates the risk of concentration—when an entire portfolio is tied to a single sector like technology, the volatility of that sector dictates the fund's returns entirely.
Structural Risks for Indian Investors
Beyond market fluctuations, investing in overseas mutual funds comes with structural risks that Indian investors should track. First is the concentration risk, where portfolios become too reliant on a few high-growth stocks. Second, there are regulatory constraints. The Reserve Bank of India (RBI) sets limits on the total amount of money Indian mutual funds can invest in overseas markets. When these limits are reached, fund houses often stop taking new subscriptions, which can sometimes lead to tracking errors or liquidity issues for investors.
Additionally, there is the factor of currency risk. Returns from international funds are influenced by both the stock price performance in the US and the movement of the Indian Rupee against the US Dollar. A strong rupee can reduce the gains for Indian investors when converting returns back to local currency, while a weakening rupee can provide a buffer.
Despite the current turbulence, long-term performance remains a key consideration for many. A significant number of these international schemes continue to show positive returns over a one-year period, suggesting that the recent selloff is a period of adjustment rather than a fundamental break in long-term growth. Meanwhile, broader market trends show that some Foreign Portfolio Investors (FPIs) are adjusting their strategies, potentially seeking exposure in Indian large-cap equities as a hedge against global tech volatility. For investors, the next step involves monitoring whether US tech companies can demonstrate clear, sustainable profit growth from their AI projects in upcoming quarters.