US Mutual Funds available to Indian investors
US-focused mutual funds available to Indian investors provide exposure to US equity markets through SEBI-approved mutual fund structures. The category includes:
- US index funds and ETFs: Tracking S&P 500, Nasdaq 100, Dow Jones, and other US indices.
- Active US equity funds: Investing in US stocks through fund-manager selection.
- Fund of Funds (FoFs): Investing in foreign mutual funds with US exposure.
- Hybrid international funds: Combining US exposure with other markets.
For Indian retail investors seeking US equity diversification, US-focused mutual funds offer the simplest mutual-fund-wrapper alternative to direct US-equity investing through Liberalised Remittance Scheme (LRS) routes. The category is subject to the overseas investment cap (USD 7 billion industry-wide, USD 1 billion per AMC), which has historically caused subscription halts when cap headroom is exhausted.
This article covers the major US-focused mutual funds, the operational considerations, the comparison with LRS-route direct US investing, and the post-2023 tax treatment.
Major US-focused mutual funds in India
Index funds
- Motilal Oswal Nasdaq 100 Fund of Fund: Tracks Nasdaq 100 (US tech-heavy index).
- Motilal Oswal S&P 500 Index Fund: Tracks the S&P 500 broad US market.
- ICICI Prudential US Bluechip Equity Fund: Active US large-cap exposure.
- DSP US Flexible Equity Fund: Active US equity strategy.
Active US equity funds
- Edelweiss US Technology Equity FoF: Active US technology focus.
- Franklin India Feeder - Franklin US Opportunities Fund: US growth-style equity.
- Mirae Asset NYSE FANG+ ETF: Top US technology and growth stocks.
- Aditya Birla Sun Life NASDAQ 100 ETF / FoF.
S&P 500 and broad-market
- Motilal Oswal S&P 500 Index Fund: Direct S&P 500 tracking.
- HDFC NYSE Index Fund: Broad US market.
- Navi US Total Market Index Fund: Total US market exposure.
Hybrid international with US tilt
- PPFAS Flexi Cap Fund (historically): Held ~30% in US stocks. Subsequently reduced due to overseas cap constraints.
- Other flexi-cap schemes with US-equity components.
Operational considerations
Overseas investment cap
The overseas investment cap directly affects US-focused fund availability:
- Industry-wide cap: USD 7 billion across all foreign-equity exposure.
- Per-AMC cap: USD 1 billion.
When the cap is approached, AMCs halt fresh subscriptions to US-focused (and other foreign) funds. The 2022 cap exhaustion caused multi-month subscription halts on many US-focused schemes.
Subscription availability
As of 2024-2025:
- Some US-focused funds open for fresh subscriptions.
- Some closed to fresh subscriptions due to AMC-level cap exhaustion.
- SIP continuations typically permitted for existing investors.
Investors should check current subscription status before planning new US-focused fund investments.
Currency
US-focused funds are valued in INR (after USD-to-INR conversion):
- Underlying holdings: US dollar-denominated.
- NAV in INR: After USD-INR exchange rate conversion.
- Currency exposure: Investors have implicit USD exposure through INR-denominated unit value.
INR depreciation against USD typically increases the INR value of US-focused fund holdings (and vice versa).
Comparison with LRS direct investing
| Dimension | US-Focused Mutual Fund | LRS Direct US Investing |
|---|---|---|
| Minimum investment | Rs 100-5,000 (mutual fund minimum) | No legal minimum (platform-specific) |
| Operational complexity | Low (standard MF) | Higher (KYC, banking, US tax) |
| Currency conversion | Done by AMC | Investor responsibility |
| US tax | None (Indian AMC handles) | Possible (US tax for direct holdings) |
| Indian tax | Slab rate (post-2023) | Slab rate (post-2023) |
| Estate planning | Standard nominee/transmission | More complex (US estate considerations) |
| Diversification | Limited to approved foreign schemes | Full universe of US securities |
For most Indian retail investors, US-focused mutual funds are simpler and operationally cleaner than direct LRS investing.
LRS limit
The LRS limit is USD 250,000 per resident per year, available for various purposes including foreign investment. For US-focused mutual funds, the LRS limit is not relevant (the AMC handles all conversion within the overseas-cap framework).
Tax treatment
Post-April 2023 framework
US-focused mutual funds are treated as debt-oriented for tax (since they invest in foreign equity, not Indian equity, and don’t meet the 65% Indian equity threshold for equity-oriented classification):
- All gains taxed at slab rate as short-term capital gains regardless of holding period.
- No long-term capital gains preference.
- No indexation benefit for purchases on or after 1 April 2023.
This taxation reduces the relative attractiveness of US-focused mutual funds versus domestic equity schemes (which enjoy 12.5% LTCG above Rs 1.25 lakh annual exemption).
Pre-April 2023 purchases
For units purchased before 1 April 2023:
- LTCG (>36 months for non-equity): 20 per cent with indexation.
- STCG: Slab rate.
Role in retail portfolios
Why US allocation matters
Indian retail investors increasingly seek US equity allocation for:
- Geographic diversification: Reducing single-country (India) concentration.
- Sector access: US dominance in technology, biotech, growth sectors.
- Currency hedge: Rupee depreciation tailwind to USD-denominated assets.
- Global wealth participation: Apple, Google, Microsoft etc. business ownership.
Typical allocation
For investors planning US equity allocation:
- Conservative: 5-10 per cent of equity allocation in US/international.
- Moderate: 10-20 per cent.
- Aggressive (globally-oriented): 25-30 per cent.
The allocation can be split between Nasdaq 100 (tech-heavy growth) and S&P 500 (broad-market) depending on investor preference.
Cap-availability strategy
Given the overseas-investment-cap constraint:
- Start early: Subscribe when cap headroom is available.
- Combine MF + LRS: For large allocations beyond what MFs can accommodate.
- Monitor announcements: SEBI/AMC notifications on cap status.
See also
- Mutual funds in India
- International mutual fund
- Overseas investment cap for MFs
- Liberalised Remittance Scheme (LRS)
- Fund of Funds
- International equity FoF
- ETF in India
- International ETF India
- Debt mutual fund taxation (post-2023)
- Equity mutual fund taxation in India
- PPFAS Flexi Cap Fund
- Motilal Oswal Mutual Fund
- Franklin Templeton India Mutual Fund
- SEBI (Mutual Funds) Regulations 1996
External references
References
- SEBI master circular on overseas investments by mutual funds.
- SEBI overseas investment cap notifications.
- Finance Act 2023 debt taxation amendment.
- AMFI scheme data on international mutual funds.