For an Indian investor seeking global diversification, the key decision is not only what to invest in, but how to access international markets.

In practice, there are 3 primary paths,

• Path 1: Domestic Mutual Funds
• Path 2: Indian ETFs with International Exposure
• Path 3: Direct International Investing via LRS

Each path offers different trade-offs in cost, flexibility, and accessibility.

A Quick Comparison

Path	Setup	Usage	Cost	Flexibility	Taxation	Market Access
1. Mutual Funds	Very Easy	Very Easy	Medium	Low	Low	Low
2. Indian ETFs	Easy	Easy	Medium	Low	Low	Low
3. Direct LRS	Moderate	Moderate	Low	Very High	Medium	Very High

Path 1: Domestic Mutual Funds

I have gained exposure to the Nasdaq 100 through two distinct Indian mutual funds. These instruments allow for international diversification using Indian Rupees (INR) without the complexities of direct foreign investing.

Mutual Fund Name	Direct Plan TER	AUM (₹ Crores)	AUM ($ Million)	Investment Timeline
Kotak US Specific Equity Passive FOF	0.24%	4,214	442.4	Jul 2022 – Feb 2023
ICICI Prudential NASDAQ 100 Index Fund	0.32%	2,773	291.1	Mar 2023 – Aug 2024

Though both funds track the same Nasdaq 100 index, they operate in different ways.

	ICICI Prudential NASDAQ 100	Kotak US Equity Passive FoF
Type	Index Fund	Fund of Funds (FoF)
Mechanism	Direct Replication: Physically buys and holds the underlying Nasdaq 100 stocks.	Feeder Route: Invests in the iShares NASDAQ 100 UCITS ETF (an Irish-domiciled ETF with 0.30% TER).
Dividend Taxation	25% (India-US Treaty) within the fund	15% (Ireland-US Treaty) within the ETF

US has a dividend with holding tax of 30%. The Irish-domiciled ETF benefits from the Ireland–US tax treaty, which reduces withholding tax on US dividends from 30% to 15%, improving long-term compounding. While India-US tax treaty reduces it from 30% to 25%.

Many other domestic funds track global or US indices. Investors can choose based on their preferred index exposure.

Pros:

• Operational Ease: No need for LRS (Liberalised Remittance Scheme) declarations, foreign brokerage accounts, or complex wire transfers
• Seamless Transactions: Managed entirely in INR; buying and redeeming works like a domestic equity fund
• NAV price: Buy/Sell happens at the NAV price declared by the AMC
• Static SIP: Fully compatible with standard SIP mandates

Cons:

• Regulatory “Hard Caps”: SEBI imposes strict industry-wide limits on overseas investments, which act as a sudden “stop” button for fresh capital:
  • $7 Billion Aggregate Industry Limit (Stocks/Funds): The total cap for the Indian MF industry to invest in foreign securities, within which individual fund houses are restricted to a $1 Billion ceiling.
  • $1 Billion Aggregate ETF Limit: A separate industry-wide cap specifically for investing in overseas-listed ETFs, which includes a $300 Million limit per individual AMC.
• Layered Costs: For the Kotak FoF, the Total Expense Ratio (TER 0.24%) is layered—you pay the Indian AMC’s fee on top of the underlying iShares ETF’s TER 0.30%. Effectively ~0.54% TER
• Limited Universe: Investors are limited to the specific offshore funds or stocks selected by the Indian fund house.

Fragility in Indian Mutual Funds investing Globally

When the industry aggregate hits the SEBI caps, the ability to deploy new capital or register fresh SIPs is effectively frozen.

This is more than a minor inconvenience; it is a significant operational hindrance for a systematic investor:

• Conflict with Perpetual Rebalancing: Because I utilize a Perpetual Rebalancing approach—deploying capital dynamically rather than through a static, fixed SIP—the suspension of fresh purchases completely broke my investment execution loop.
• Forced Inactivity: These restrictions rendered me unable to invest in this asset class from September 2024 to April 2025.
• Strategy Pivot: The eight-month hiatus ended only when I switched to Path 3 to regain market access.

This experience proves that these caps are not just theoretical risks; they are tangible barriers that can stall a rule-based investment engine for months at a time.

In theory, domestic mutual funds are the easiest way for Indians to access global markets. In practice, regulatory caps make them unreliable for investors who need consistent market access.

I wouldn’t have discovered Path 3, if not for these barriers. Ironically, these limits were introduced in 2008 and have not been meaningfully revised despite the massive growth of the Indian mutual fund industry and Forex reserves with RBI.

Path 2: Indian ETFs with International Exposure

The second path available to Indian investors is Indian-listed ETFs that track global indices. These instruments trade on Indian exchanges like regular stocks and offer another way to access international markets without using LRS.

I explored following ETFs as an alternative to the Mutual Fund route which can be traded directly on the NSE/BSE.

ETF Name	Ticker	TER	AUM (₹ Crores)	AUM ($ Million)	Exchange
Motilal Oswal Nasdaq 100	MON100	0.59%	10,971.5	1,151.9	NSE / BSE
Mirae Asset NYSE FANG+	MAFANG	0.66%	3,184.9	334.4	NSE / BSE

Pros:

• Real-Time Execution: Traded on stock exchanges, allowing for entry or exit at current market prices
• No LRS: Rupee-denominated and does not count toward the individual LRS limit

Cons:

• The “Premium” Trap: When SEBI limits are reached and unit creation is suspended, these ETFs often trade at significant premiums to their actual NAV.
• Liquidity Risk: Thin trading volumes in certain international ETFs can lead to wide bid-ask spreads.
• Restricted Universe: Investors are still limited to the specific indices or themes launched by Indian fund houses.

Current Market Realities (May 2026):

Due to the creation freeze, these ETFs are trading at heavy premiums, making them inefficient for systematic rebalancing:

Ticker (ETF Name)	Market Price (₹)	i-NAV (₹)	Premium (%)
MON100 (Motilal Nasdaq 100)	299.17	250.00	~19.6%
MAFANG (Mirae FANG+)	180.54	150.90	~19.6%

When ETF unit creation is suspended due to SEBI limits, the supply of new units stops while investor demand continues. As a result, the ETF begins trading significantly above its intrinsic value (NAV).

At first glance, Indian ETFs appear to solve the problem of mutual fund subscription freezes. In reality, they introduce a different problem — price distortion.

The Structural Deadlock: Path 1 vs. Path 2

Path 2 (Indian-listed ETFs) is essentially the exchange-traded equivalent of Path 1 (Mutual Funds), offering no functional improvement during regulatory freezes. Once SEBI limits are breached, both structures break. One stops accepting money. The other forces investors to pay a premium.

The Systematic Conclusion

For an investor following a Perpetual Rebalancing approach, both structures fail the stress test of a regulatory freeze. One denies the ability to buy, while the other demands a prohibitively high premium. This structural fragility is the primary driver for seeking a more robust architecture that ensures consistent market access.

Path 3: Direct International Investing via LRS

With Path 1 unavailable and Path 2 trading at heavy premiums, I began exploring Path 3.
Figuring out the LRS route and nuances involved took a while before I could restart my international investment journey by May 2025.

For a systematic investor, bypassing the regulatory gatekeepers is no longer just an optimization—it is a requirement for maintaining an uninterrupted investment engine.

Steps involved in Path 3

This is slightly a longer journey compared to Path 1 or Path 2. We will see each of them in detail in following chapters.

1. Open a foreign brokerage account (directly or indirectly via Indian intermediary)
2. Remit money under the Liberalised Remittance Scheme (LRS) in a cost-efficient manner.
3. Invest directly in global ETFs — especially Irish-domiciled UCITS ETFs.
4. Optimizing Taxation (TCS @ 20% above 10 lakhs/FY - using new Form 122 (previously known as 12BAA Form) to adjust TCS against salary TDS)
5. Tax Reporting (Filling up Schedule FA/Schedule FSI sections in ITR2 for salaried)

As part of the remaining chapters I will try to explain the various aspects of these steps.

My setup

When I started Path 3, I set up an Interactive Brokers account via ICICI Direct Global. Initially remitted money using ICICI Bank with a promotion code offered by ICICI Direct Global. I have exposure to following two Irish ETFs tracking Nasdaq 100.

ETF Name	Ticker	TER	AUM ($ Million)	Exchange (IBKR)	Investment Timeline
Xtrackers NASDAQ 100 UCITS ETF 1C	XNAS	0.20%	2,084	LSE (LSEETF)	May 2025 – Jan 2026
BNP PARIBAS EASY II Nasdaq 100 UCITS ETF	ANAU	0.14%	2,372	SIX Swiss (EBS)	Since Mar 2026

Pros:

• Access to the full global universe — any ETF listed on international exchanges
• No SEBI cap constraint stopping international investments abruptly
• At scale, total cost (FX + brokerage) can be lower than the TER drag of FoF funds
• Better tax treatment/reporting when using accumulating Irish ETFs (deferred gains, no annual dividend)

Cons:

• Requires setup effort: bank FX Retail configuration, brokerage account KYC
• FX costs on remittance (I classify < 1% as good and < 0.5% as excellent transaction cost)
• TCS applies above INR 10 lakh per year (cashflow drag, can be adjusted via Form 122)
• More complex tax filing (Schedule FA, Schedule FSI (only applicable when selling))

What initially looked like a complicated path gradually revealed itself to be the most robust structure for long-term global investing.

Notes:

• Data in this chapter reflects information available at the end of April 2026 / start of May 2026
• If you observe closely, as we move from Option 1 to Option 3, the scale of the underlying funds increases dramatically. The iShares Nasdaq 100 UCITS ETF (Acc) the top one in Irish ETFs for Nasdaq 100 is at $23,988 Million. I chose lower-TER alternatives instead.

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Now that we have examined the three structural paths available to Indian investors, the next chapter explores how to practically set up the infrastructure required for direct international investing.

Work In Progress: Writing/Refining further chapters. Stay tuned!