Indian investments in overseas equity and debt rose 30 per cent year-on-year (y-o-y) in FY26 till February to $2.21 billion (Rs 20,883 crore), as weak domestic returns, a weakening rupee, the global artificial intelligence (AI) boom, and a growing preference for international diversification prompted more investors to allocate funds abroad. In comparison, such investments stood at $1.70 billion (Rs 16,064 crore) in FY25, according to data compiled from the Reserve Bank of India’s (RBI) outward remittances.
The shift is also visible in mutual fund schemes that invest in global equities and debt instruments. Assets under management (AUM) of fund of funds investing overseas rose 53 per cent to Rs 38,287 crore by March 2026, up from Rs 25,031 crore a year earlier, according to Association of Mutual Funds in India (Amfi), showing that more investors are using domestic mutual funds to invest in international markets.
Weak Domestic Returns And AI Boom
Overseas investments are rising as Indian markets consolidate after a strong rally, leading investors to look at global options for better returns. Over the past year, India’s equity markets have been mostly weak. The Sensex fell 3.75 per cent, while the Nifty 50 stayed almost flat with a 0.40 per cent return. Broader markets performed better but not at par with what global markets have delivered. The Nifty Midcap 100 and the Nifty Smallcap 100 gained around 14 per cent over the past one year.
Aparna Shanker, CIO (equity) at The Wealth Company Mutual Fund said, “The relatively muted performance of domestic equities over the last year has certainly acted as a catalyst for this trend, although it may not be the sole reason. Indian markets witnessed a strong multi year rally prior to the recent consolidation phase.”
Global markets, on the other hand, have done much better. South Korea’s Kospi rose 190 per cent, Taiwan’s TAIEX gained 102 per cent, Japan’s Nikkei 225 climbed nearly 70 per cent, and the US Nasdaq rose about 44 per cent in the same period.
The reason behind their outperformance is the artificial intelligence (AI) boom, which has quite justifiably attracted domestic investors.
"The AI boom has played a major role in accelerating investor interest toward global equities, particularly the US market. Many of the companies leading the artificial intelligence revolution, whether in semiconductors, cloud infrastructure, software, or digital platforms, are listed overseas,” she said.
Taiwan’s TSMC, the world’s biggest chipmaker, has been a key driver of this trend. It makes up more than 45 per cent of Taiwan’s main index, TAIEX. Other companies like MediaTek, Hon Hai, ASE Technology, Delta Electronics, and Quanta Computer have also seen strong gains due to rising demand for AI-related products.
South Korea has also benefited from this trend. Samsung Electronics and SK Hynix, which together account for over 40 per cent of the Kospi index, have gained from strong demand for advanced memory chips used in AI systems.
Weakening Rupee Dimming India's Appeal
Analyst also attribute a weakening rupee behind the growing affinity of Indian investors towards overseas market.
Eshaan Lazarus, founder & chief executive officer, 021 Trade, said stretched valuations and currency depreciation have further encouraged global diversification.
“India has been at peak valuations since 2024. Returns have been flat to negative since then. The rupee has also weakened significantly, creating a cycle of Foreign Institutional Investors (FIIs) pulling money out, which weakens the currency further, which weakens returns further,” he said.
According to Sachin Jasuja, a Sebi-registered investment advisor and head of equities and founding partner at Centricity WealthTech, the surge in overseas investment reflects a rational portfolio response to two years of domestic underperformance compounded by a structurally weakening currency. The rupee has depreciated over 10 per cent against the US dollar over the past year.
“An Indian investor who stayed home did not just earn nothing; they lost purchasing power in dollar terms. Meanwhile, US markets offered the exact opposite. Nvidia growing revenues 65 per cent year-on-year, Palantir compounding at 30 per cent+ annually, Broadcom, TSMC, and AMD riding structural AI and semiconductor demand tailwinds,” Jasuja said.
According to Jasuja, regulatory restrictions are currently slowing the pace of global diversification among Indian investors.
“The Liberalised Remittance Scheme (LRS) cap of $250,000 per individual and 20 per cent Tax Collected at Source (TCS) above Rs 10 lakh are already acting as a structural brake on outflows. Remove these constraints and the $2.21 billion number would be multiples higher,” he said.
"The rupee is the real story," he added, saying "When your home currency loses 11 per cent in a year, every dollar asset becomes an automatic hedge, and Indian investors are increasingly sophisticated enough to act on that."
The Liberalised Remittance Scheme (LRS), introduced by the Reserve Bank of India (RBI), allows resident individuals to remit up to $250,000 per financial year abroad for permitted purposes such as overseas investments, travel, education, medical expenses, and gifting. The limit applies per individual for each financial year (April to March) and is available only to resident individuals.
