International assets
Shares listed outside India, bonds in other currencies or real estate abroad — investments that carry the asset's own risk plus the effect of exchange-rate movements against the rupee.
In plain language
Most Indian investors buy Indian shares and Indian bonds in rupees. But the same four asset classes exist everywhere.
Chapter 1 defines international assets by example: shares of companies listed outside India, bonds denominated in currencies other than the Indian rupee, and real estate abroad.
The workbook's advice is to take it in two steps. First understand the basic nature of the asset class — a foreign share is still equity, a foreign bond is still fixed income. Then assess the impact of currency fluctuation on top of it.
How it works
An international asset gives you two exposures in one purchase. The workbook's illustration: an investor buying shares of a company listed on the London Stock Exchange is exposed to the fortunes of the company, as well as the change in exchange rate between the British Pound and the Indian Rupee.
A mutual fund investor reaches these assets in several ways the workbook names:
- International funds — a category in the classification by investment universe.
- Fund of Funds (Overseas) — an open-ended scheme with at least 95 percent in the underlying fund.
- Index funds tracking a foreign market — described in Chapter 4 as an excellent choice for those who want to invest overseas but lack the skill to research foreign stocks.
- International REITs — exposure both abroad and to commercial real estate.
The rules change once you go overseas:
| Rule | International schemes |
|---|---|
| Tax (Chapter 8 table) | "Other MFs (Fund of Funds, International Funds / FOFs)": STCG at MSR, LTCG at 12.50%, long-term after 24 months |
| Cut-off timings (Chapter 9) | The standard cut-off table does not apply to NFOs and International Schemes |
| Multi Asset Allocation Fund | Foreign securities are not treated as a separate asset class |
A worked example
Arjun in Bengaluru invests Rs 8,00,000 in a London-listed share when £1 = Rs 100, buying £8,000 worth. All figures are illustrative.
Case 1 — the share rises, the pound falls. The share gains 10 percent to £8,800, but the pound weakens to Rs 95.
Value in rupees = 8,800 × 95 = Rs 8,36,000
Gain = Rs 36,000 → 4.5% (not 10%)
Case 2 — the share is flat, the pound rises to Rs 105.
Value in rupees = 8,000 × 105 = Rs 8,40,000
Gain = Rs 40,000 → 5% with no move in the share at all
If Arjun instead used an international fund of funds and redeemed after 20 months with a gain, Chapter 8 treats it as short-term (the threshold for this category is 24 months), taxed at his marginal slab rate.
Why NISM asks about it
Chapter 1.2 defines international assets at the end of the asset-class discussion, and Chapter 2.2.3 lists international funds in the classification by investment universe. Chapter 4 recommends foreign-market index funds, Chapter 8's tax table sets the 24-month long-term threshold for international funds and FoFs, and Chapter 9 excludes international schemes from the standard cut-off timings. Expect the currency point as a concept question.
Common exam traps
- An international asset is not a fifth asset class. It is equity, debt or real estate located abroad, with currency risk added.
- A rising foreign share can still lose you money in rupees if the foreign currency falls far enough — and a flat share can make money if it rises.
- International funds and FoFs need 24 months, not 12, to be long-term in the Chapter 8 table.
- Standard cut-off timings do not apply to international schemes.
- The foreign currency risk section in Chapter 7 is about FPIs holding rupee-denominated units; the AMC does not manage that risk for them.
Where this is taught
- Series V-D · Chapter 1: Investment Landscapeintroduced here
- Series V-B · Chapter 1: Investment Landscapeintroduced here
Related terms
- Cut-off timeThe SEBI-prescribed clock time that, read together with the time stamp on the request, decides which day's NAV a mutual fund transaction is priced at.
- Index fundsA passive open ended scheme that replicates or tracks a specific index, investing at least 95 percent of total assets in that index's securities, bought and redeemed from the fund rather than on an exchange.
- Asset classA grouping of investments with similar characteristics. The workbook names four broad asset classes — real estate, commodities, equity and fixed income — each with its own sub-categories.
- Fund of fundsAn AIF that invests in the units of other AIFs rather than directly in investee companies — buying diversification across managers and strategies, and paying two layers of fees for it.
- Safe haven assetAn asset investors turn to when an economy or a currency fails. In the workbook the safe haven asset is gold — considered by many the final shelter, though the opposite camp argues strongly against it.
- Exchange Rate RiskThe risk that an investment’s value, measured in the home currency, changes because foreign exchange rates move. A falling rupee raises returns on foreign assets; a rising rupee cuts them.