By Ramneek Kundra
There are several India-listed funds, sold under catchy ticker symbols like MON100 offering NASDAQ100 exposure, MAFANG offering exposure to largecap US tech stocks, and MASPTOP50 offering exposure to top 50 S&P500 companies.
These allow an Indian investor to own a piece of America’s biggest companies — the Apples, the Nvidias, the Microsofts of the world, without leaving the Indian exchange.
The trouble is the price. These funds are trading at a markup of 15-22% over what their American shares are actually worth. If a buyer puts in Rs 10 lakh today, only about Rs 8.3 lakh worth of those famous US companies actually ends up in his account. The remaining Rs 1.7 lakh is, plainly speaking, a tax on convenience.
Why is this so? In 2022, the Reserve Bank of India placed a quiet cap on how much money mutual funds could send abroad. Supply froze. And so, the price drifted upward.
The other door
There is a second door. Under the Liberalised Remittance Scheme, an Indian is permitted to send up to $250,000 a year abroad to invest directly. Through platforms like Vested, IND Money, or Interactive Brokers, one can buy the very same American shares, at their real American price. One can also buy outbound funds offered through IFSC (International Financial Services Centre) entities in GIFT City. No markup. No hidden tax. No queue.
Open the account once. Sign a few forms. Declare the foreign assets in the tax return each year, as the law requires. That is the whole of it.
The investors who consider their money respect-worthy such as institutions, family offices, and seasoned individuals have quietly walked through this door years ago.
The margin of safety, inverted
Benjamin Graham, the father of modern investing, taught a single great idea — the margin of safety. Never, he said, pay more for a thing than what it is worth. Leave room for error. Leave room for surprise.
Buyers paying Rs 1.20 for Rs 1 of stock are doing the exact opposite. They are buying a guaranteed loss and hoping for a future gain large enough to cover it. Every fund in financial history that traded at such a structural premium eventually re-rated downward when its cheaper alternative became known. The Spain Fund. The Korea Fund. The Germany Fund. More recently, the Grayscale Bitcoin Trust in America — which moved from a 40% premium to a 50% discount in less than two years. Not one of them survived as a permanent free lunch.
What to do
For anyone considering meaningful overseas exposure, the message is simple. Find out what you are paying. Find out what you are getting. If there is a markup, ask why, and ask whether another door exists.
In this case, it does. It has been there all along. The paperwork is modest. The savings, over a lifetime of investing, are not.
The writer is CIO, DSP Pension Fund
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Investors should assess their financial goals, risk appetite and consult a qualified financial advisor before making investment decisions.
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