US-focused mutual fund (India)
A US-focused mutual fund is a SEBI-recognised international fund category that gives Indian investors exposure to US equity markets. The schemes are typically structured as Fund-of-Funds (FoF) investing in US-listed ETFs tracking the S&P 500 , Nasdaq 100 , or actively-managed US equity funds. The category is part of the broader International funds family available to Indian retail investors.
For Indian retail investors seeking US equity diversification, US-focused mutual funds provide:
- Sector-balanced US large-cap exposure (S&P 500) or tech-tilted exposure (Nasdaq 100).
- Currency diversification into USD.
- Convenient INR-denominated investment vehicle.
- No need to set up US brokerage accounts or use the LRS scheme directly.
Structure
Fund-of-Funds (most common)
Indian US-focused FoFs:
- Hold units of US-listed ETFs (SPY, IVV, VOO for S&P 500; QQQ for Nasdaq 100).
- Maintain INR-denominated NAV.
- Charge an additional FoF wrapper TER on top of the underlying ETF TER.
Total TER:
- Underlying US ETF: 0.03 to 0.20% (very low for S&P 500 / Nasdaq 100 ETFs).
- FoF wrapper: 1.0 to 1.5%.
- Combined: 1.0 to 1.7% (still lower than typical Indian active equity funds).
Direct ETF investing (less common)
Some Indian-listed US ETFs exist that trade on BSE / NSE:
- ICICI Prudential Nasdaq 100 ETF.
- Motilal Oswal Nasdaq 100 ETF.
These hold US securities directly via the underlying-fund structure.
Currency exposure
US-focused funds are exposed to USD-INR movements:
- INR depreciation: Adds to total return.
- INR appreciation: Subtracts from total return.
Historical context: INR has depreciated approximately 2 to 3% annually against USD over the past 20 years, providing a tailwind for US-focused funds in INR terms.
Some funds offer currency-hedged variants that neutralise USD-INR exposure (at the cost of hedging premium, typically 50 to 100 bps annually).
Leading schemes
Notable US-focused mutual funds in India:
- Motilal Oswal S&P 500 Index Fund (S&P 500 FoF).
- Motilal Oswal Nasdaq 100 FoF (Nasdaq 100 FoF).
- Nippon India US Equity Fund (active US equity).
- Kotak Nasdaq 100 FoF (Nasdaq 100 FoF).
- ICICI Prudential US Bluechip Fund (active US equity).
Tax treatment
Per debt mutual fund taxation post-2023 (which extended to international FoFs):
- All gains taxed at investor’s slab rate.
- No LTCG benefit (despite holding equities, classified as debt-MF for tax under post-2023 rules).
- 20% TDS if NRI investor, subject to DTAA.
This is less tax-favourable than domestic equity funds but still competitive on net-return basis given US market’s long-term returns.
Comparison with related categories
| Category | Underlying market | Tax treatment | Currency |
|---|---|---|---|
| US-focused MF | US equity | Slab rate | USD-INR |
| Europe-focused MF | European equity | Slab rate | EUR-INR |
| Japan-focused MF | Japanese equity | Slab rate | JPY-INR |
| China-focused MF | Chinese equity | Slab rate | USD/CNY-INR |
| EM-focused MF | Emerging markets | Slab rate | Mixed |
| International funds | Various | Slab rate | Mixed |
See also
- Mutual funds in India
- SEBI October 2017 categorisation
- International funds
- S&P 500
- Nasdaq 100
- MSCI World
- MSCI Emerging Markets
- China-focused mutual fund
- Europe-focused mutual fund
- Japan-focused mutual fund
- EM-focused mutual fund
- Fund of Funds (India)
- International equity FoF
- Debt mutual fund taxation (post-2023)
- LRS scheme (RBI)
- Motilal Oswal S&P 500 Index Fund
- Motilal Oswal Nasdaq 100 FoF
- SEBI
External references
References
- SEBI master circular on international mutual funds.
- Income Tax Act 1961, post-2023 amendments.
- AMFI Best Practice Guidelines.