International Equity Funds Shine in 2025 as Global Exposure Returns to Investor Focus
International equity funds made a strong comeback in 2025, delivering outsized returns and reclaiming investor attention after a subdued phase in previous years. Select global funds surged as much as 79 percent, driven by strong rallies in US technology stocks, artificial intelligence-linked themes, and a rebound in commodity-related sectors. With global equities now entering 2026 on firmer footing, investors are increasingly reassessing international funds as a diversification tool rather than a short-term tactical play.
The renewed interest comes despite structural constraints on overseas investing. Regulatory limits continue to cap industry-wide overseas investments at $7 billion, with individual fund houses restricted to $1 billion each. As a result, many international mutual fund schemes remain partially or fully closed to fresh inflows. However, a limited set of schemes is still accepting lump-sum investments and SIPs, offering selective entry points for investors seeking global exposure.
How International Mutual Funds Performed in 2025
Performance across international equity funds in 2025 was mixed but decisively improved compared with recent years. According to ACE Mutual Fund data as of December 30, 2025, the top 10 international funds delivered average one-year returns of around 49 percent, reflecting strong regional and thematic tailwinds.
Key performance highlights included:
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DSP World Mining Overseas Equity Omni FoF, which topped the charts with 79 percent one-year returns, supported by a sharp rally in global mining and commodity stocks
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ICICI Prudential Strategic Metal and Energy Equity FoF, which benefited from higher metal prices and energy demand
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Mirae Asset NYSE FANG+ ETF FoF, delivering 23 percent returns in one year and 64 percent over three years, riding gains in large US technology stocks
Thomas Stephen, Director & Head – Preferred at Anand Rathi Share and Stock Brokers, said US-focused strategies led performance.
“This was supported by robust earnings growth in technology, semiconductors and AI-led businesses, along with resilient economic growth,” he noted.
For perspective, the Nasdaq-100 gained about 20 percent in 2025, outperforming the Nifty 50’s 12 percent return, underscoring the relative strength of US equities.
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Regional Trends Shape Global Fund Returns
Beyond the US, Japan emerged as another standout market in 2025. Corporate governance reforms, improving return ratios, and a weaker yen helped Japanese exporters and equities outperform. Several Japan-focused global funds delivered steady gains, attracting attention from long-term investors.
European markets posted moderate returns, with performance concentrated in value-oriented sectors such as financials, industrials, and energy. Growth remained slower due to geopolitical uncertainties and tighter fiscal conditions, but selective opportunities persisted.
China and broader emerging markets, however, lagged global peers. Persistent weakness in China’s property sector, subdued consumer demand, and uneven policy support weighed on sentiment. Despite this, some Greater China-focused funds posted respectable gains. The Edelweiss Greater China Equity Offshore Fund delivered returns of about 37 percent in 2025, reflecting selective recovery pockets.
Limited Availability Keeps Select International Funds in Focus
Despite strong performance, access to international funds remains constrained. Many fund houses had previously halted inflows after breaching overseas investment limits, and only a select set of schemes continues to accept fresh investments.
Investors looking at these funds are advised to check:
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Whether lump-sum investments are allowed
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SIP availability and caps
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AMC-level overseas investment headroom
This limited supply has made open international funds particularly attractive for investors seeking diversification outside Indian equities.
Should Investors Add International Funds Now?
Market experts caution against chasing past returns, emphasising the role of international equities as a portfolio diversifier.
“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 strategic allocation of around 10–20 percent of their equity portfolio to overseas equities, depending on risk appetite and investment horizon.
Key considerations before investing include:
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Valuation comfort in global markets
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Currency impact on returns
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Long-term investment horizon
What the Global Market Outlook Looks Like for 2026
Looking ahead to 2026, the outlook for international equities appears cautiously optimistic but uneven. Factors likely to shape returns include:
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The trajectory of US interest rates and Federal Reserve policy
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Sustainability of corporate earnings, particularly in AI and technology sectors
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Global trade dynamics and geopolitical risks
Stephen noted that easing inflation and gradual rate cuts could support valuations, but elevated debt levels and geopolitical uncertainty may keep volatility higher than historical averages.
“This points to moderate but relatively stable return expectations rather than outsized gains,” he said.
Among global markets, the US remains relatively well-positioned due to its leadership in innovation, strong corporate balance sheets, and better earnings visibility. Emerging markets excluding China could also benefit from supply-chain realignment and easing financial conditions, though outcomes are expected to be country-specific.
International Funds as a Strategic Allocation Going Forward
After a strong 2025, international equity funds have re-established their relevance in Indian investor portfolios. While regulatory constraints limit access, the funds that remain open provide an opportunity to build global exposure gradually. As markets head into 2026, international funds are likely to play a supporting role—offering diversification, currency hedging, and participation in global growth themes—rather than serving as a primary return driver.
For investors with a long-term horizon, disciplined allocation rather than return-chasing may define successful global investing in the year ahead.
