Nasdaq AI selloff puts overseas mutual funds in focus: US tech funds fell upto 11% in a month
Some US-focused funds have lost over 10 percent in a month, while others have gained. What explains the gap?
Representative Image: Overseas Funds Under Pressure
Friday’s sharp Nasdaq selloff has put Indian overseas mutual funds back in focus, particularly those investing in US technology and artificial intelligence (AI) stocks. Several such funds have lost more than 7 percent over the past month, with some recording double-digit declines.
The Nasdaq Composite fell 2.86 percent on October 30 amid concerns over heavy AI spending and whether technology companies can generate sufficient returns on these investments.
These schemes are funds of funds (FoFs) that invest in overseas ETFs or mutual funds. While passive FoFs tracking indices such as the Nasdaq 100 must largely follow their benchmarks, actively managed underlying funds have greater flexibility to adjust their holdings during market corrections.
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The weakness is also visible in Indian international mutual fund returns, although the one-month figures reflect a longer period and not just Friday’s fall.
Over 80% of overseas equity funds in the red
An analysis of ACE MF data as of November 2 shows that 43 of 52 overseas equity and equity-linked schemes with available one-month returns were in negative territory. Only nine posted gains.
Yet the longer-term picture remains stronger. Of the 51 schemes with available one-year data, 46 delivered positive returns.
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US technology funds among the hardest hit
Motilal Oswal Nasdaq 100 FoF declined 11.30 percent over one month, while Edelweiss US Technology Equity FoF fell 10.75 percent. Mirae Asset Global X AI & Technology ETF FoF lost 8.43 percent.
Other Nasdaq-linked funds from Invesco, Aditya Birla Sun Life, Kotak, Axis and Navi recorded declines of around 7.5–7.8 percent.
The weakness extended to global innovation-focused funds. Axis Global Innovation FoF fell 6.94 percent over one month, Kotak Global Innovation FoF declined 5.75 percent and DSP Global Innovation FoF lost 3.81 percent. Unlike Nasdaq 100 funds, these schemes follow broader innovation themes, with investments potentially spread across sectors and geographies.
Despite the recent losses, all nine funds in the table remain positive over one year. Mirae Asset NYSE FANG+ ETF FoF, for instance, has returned 27.29 percent over one year despite falling 5.11 percent in the past month.
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Not all US-focused funds have suffered equally
The data also reveals substantial differences among funds investing in US equities.
While Edelweiss US Technology Equity FoF declined 10.75 percent, Edelweiss US Value Equity Offshore Fund gained 2.81 percent over the same period, a gap of 13.56 percentage points.
Similarly, Navi Total Stock Market US FoF fell just 1.62 percent, compared with a 7.53 percent decline in Navi Nasdaq100 FoF.
The difference reflects how overseas funds can follow very different investment strategies. A Nasdaq-focused fund has significant exposure to large US growth and technology companies, while broader equity and value-oriented funds may have a different sector mix.
What should investors do?
The correction is a reminder that investing overseas does not automatically mean a well-diversified portfolio. Investors holding technology-heavy international funds may still be exposed to substantial concentration risk, even though their investments are outside India.
Before investing or reacting to recent losses, investors should examine the fund’s underlying holdings, sector concentration and investment horizon. Currency movements can also affect returns for Indian investors.
A short-term correction alone may not warrant an exit, particularly when the investment is intended for long-term diversification. What matters is whether the fund provides the exposure investors actually want, rather than simply following a market or theme that has delivered strong past returns.
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