The Securities and Exchange Board of India issued a circular allowing Indian mutual funds to invest up to 10% of their overseas allocation limit in foreign funds focusing on artificial intelligence and related technology themes. This is the first time SEBI has explicitly permitted thematic overseas investment, departing from the earlier approach of allowing only geographic diversification through funds of funds investing in broad international indices.
The circular enables Indian AMCs to launch fund-of-fund products that invest in overseas AI-focused ETFs and active funds, giving retail investors access to global AI leaders like NVIDIA, Microsoft, Alphabet, Amazon, Anthropic and other companies that are driving the current AI revolution. Existing products like Mirae Asset NYSE FANG+ ETF and Motilal Oswal NASDAQ 100 ETF, which have AI component exposure, continue to operate under the broader overseas allocation limits.
Several AMCs are already working on new AI-focused FoF products to launch once the SEBI circular's operationalisation guidelines are finalised. The move is broadly positive for Indian retail investors who have limited direct access to global equity markets. Financial planners note that 5-10% international allocation is optimal for most retail portfolios as it provides diversification beyond India while avoiding over-exposure to currency and geopolitical risks. The specific AI thematic allocation should be treated as a high-risk, high-potential-return satellite bet within that international allocation.
