Indian investors remain hesitant about overseas investing despite global markets hitting record highs, according to ETMarkets Smart Talk with Himanshu Kohli, Co-founder of Client Associates. The primary concerns revolve around taxation complexities and operational clarity. Under the LRS route, many investors worry about potential scrutiny from tax authorities, as well as the impact of TCS on cash flows. Limited awareness about overseas investing avenues and restricted mutual fund routes further constrain global allocations, making access to global markets narrower than investors would prefer.
For investors with existing US market exposure, the advice is to hold on to existing investments rather than selling, as selling can trigger tax implications and structural limits often make switching difficult. According to Kohli, investors should first revisit their overall asset allocation and consider incremental allocations toward non-US markets, particularly emerging markets. While the dollar has strengthened recently due to geopolitical factors, the trend is expected to reverse as interest-rate differentials likely narrow. During periods of US dollar weakness, emerging markets have historically outperformed developed markets.
Kohli identifies select sectors with constructive views for 2026. With earnings momentum in US technology remaining strong, recent drawdowns offer opportunities through disciplined buy-on-dip strategies. Power utilities are gaining relevance due to rising energy demand linked to artificial intelligence infrastructure. Additionally, defence has come into focus as geopolitical tensions have prompted many countries to raise defence spending to invest in domestic capabilities amid shifting global alliances. The MANGO acronym (Meta, Apple, Nvidia, Google, and OpenAI) is gaining attention as the market shifts focus from traditional consumer platforms to companies dominating the artificial intelligence ecosystem.
Investors face apprehension around compliance and regulatory queries despite improved taxation rules. There is lingering ambiguity around investment structures, particularly in GIFT City, where investors are not always clear whether they must invest through pooled vehicles or whether customized investment structures are possible. The comfort and familiarity factor is significant, as domestic investors are accustomed to the depth of information available on Indian managers and companies, which is not always easily accessible for global investments. Limited awareness about overseas investing avenues and restricted mutual fund routes further constrain global allocations.
