Indians get a new route to the world's markets via GIFT City

Summary: International funds shut the door. GIFT City may have just opened another. Learn how PPFAS’s new S&P 500 and Nasdaq 100 FoFs work, how LRS-based investing bypasses SEBI’s cap and what this means for your portfolio’s global allocation. A quiet revolution in how Indians invest abroad is taking shape in Gandhinagar. For the past three years, anyone trying to start a fresh SIP in an “international fund” has run into the same dead end: the scheme is either temporarily closed for fresh subscriptions or accepting only token money. The reason has nothing to do with investor demand and everything to do with regulation. Indian mutual funds collectively hit the industry-wide ceiling on how much they can invest overseas – and then got stuck there. Now, a new window is opening through GIFT City’s International Financial Services Centre (IFSC). PPFAS, long associated with sensible global investing, is among the first few to build a retail “outbound” bridge: US equity funds based in GIFT City that Indian residents can access under the RBI’s Liberalised Remittance Scheme (LRS). This is not just another product launch. It is the beginning of a parallel route for Indians to own the world’s biggest companies – outside the old, congested mutual fund channel. How the old overseas route choked up Until recently, the simplest way for a regular Indian investor to gain global exposure was to invest in a domestic mutual fund that invested abroad – either directly in foreign stocks or via overseas ETFs and funds. SEBI, however, capped how much the Indian mutual fund industry could invest overseas. USD 7 billion in total for all schemes investing in foreign securities, with an additional USD 1 billion window for schemes investing in overseas ETFs, and a per-AMC cap of USD 1 billion (excluding foreign ETFs). As US and other global markets boomed post-Covid, investor flows surged, and the industry collectively crept up to that ceiling. Rather than risk breaching RBI’s comfort zone on foreign exchange outflows, SEBI told fund houses to stop taking in fresh money into overseas-oriented schemes once the limits were effectively used up Existing investors could stay; portfolios could be managed, but the window for new money was effectively shut. For investors who believed in diversification through global index funds or international flexi-cap schemes, this was frustrating. Yes, they could still invest abroad directly using LRS – opening foreign brokerage accounts, wiring dollars, dealing with foreign tax forms and complex reporting – but the “simple Indian mutual fund” route that had democratised global investing had hit a hard stop. Enter GIFT City: a new outbound bridge While the domestic mutual fund route remains constrained by the USD 7 billion cap, a separate ecosystem has been quietly growing at GIFT City’s IFSC in Gujarat. GIFT IFSC is treated as an offshore jurisdiction for many purposes, with its own regulator, the International Financial Services Centres Authority (IFSCA) and a distinct tax and legal framework designed to compete with global financial hubs. Fund structures there already enjoy fund-level taxation and significant exemptions on many types of foreign securities. So far, most of the action in GIFT City has been in high-ticket structures such as Alternative Investment Funds (AIFs), aimed at HNI