GIFT IFSC funds see retail rush amid outperforming global markets

As Indian markets have increasingly been outpaced by their global peers, more Indians are now investing in international markets through the Gujarat International Finance Tec-City (GIFT City), data from the International Financial Services Centres Authority (IFSCA) showed.

The number of investors in such retail schemes rose to 8,467 in the April-June quarter, up from 3,483 in the previous quarter. This was also the first time when the retail audience controlled the biggest piece of the pie in GIFT City’s fund management ecosystem, constituting over 52% of the total investors putting money into such international funds.

Meanwhile, alternative investment funds totalled 7,683 investors in the latest quarter, up 26% quarter-on-quarter, with their share in the hub’s fund management ecosystem dropping from nearly 64% in the previous quarter.

Shweta Rajani, head of mutual funds at Anand Rathi Wealth, attributed this retail momentum to “improving access to global investments from within India, along with greater clarity around the taxation of retail schemes and ETFs.” “For investors, the main attraction is access to global markets such as the US and other developing country markets and international products, without having to directly invest overseas,” added Rajani.

For context, GIFT City in Gujarat’s Gandhinagar is an IFSC hub that provides tax benefits, reduced regulatory compliance, and other incentives to attract international players. It also offers high-net-worth individuals, NRIs, and retail audiences an avenue to invest in foreign markets in foreign currencies through GIFT City IFSC funds.

IFSC funds are regulated by the IFCA, unlike overseas fund of funds (FOFs) that are regulated by SEBI. While overseas FOFs do not have individual investment limits, SEBI imposes a $7 billion annual investment cap on the entire mutual funds industry while investing in such firms and a $1 billion cap on individual asset management companies.

Meanwhile, IFSC funds are bound by the $250,000 limit under the liberalised remittance scheme (LRS). All fund houses that typically run overseas FoFs stopped fresh intake into their overseas schemes between July and early August due to the industry hitting its overseas investment limit.

Thus, these fund houses cannot accept fresh subscriptions in such schemes despite demand remaining high as most major global markets continue to outpace India. The benchmark Nifty 50 and Sensex indices are down around 8-10% so far this year.

Meanwhile, stock markets in the US, South Korea, Taiwan, and Japan have grown 10-59% in that time. “Of course, when the domestic stock market is underperforming, many in the retail section who have the money will also chase growth in other markets.

So this pent-up demand is materialising through GIFT City as access improves and funds launch new IFSC funds,” a fund manager at a domestic fund house said. Many fund houses had initially targeted AIFs and other wealthy investors while setting up operations in GIFT City.

Nikhil Kamath-founded True Beacon and Kotak Alternate Assets were among the first to do so back in 2021. The likes of Edelweiss, Nippon India Life, and DSP Asset Managers also entered the space in 2025. However, fund houses have now increasingly started launching more retail-oriented City IFSC funds as demand has boomed.

The likes of PPFAS, DSP, Tata Mutual Fund, and Edelweiss have launched funds specifically targeting Indian retail investors this year. Many have minimum subscriptions as low as $500, compared to the $5,000 minimum subscription seen in some other funds, making investing abroad relatively affordable for the average Indian.

Some fund houses have also applied for licences to launch retail IFSC funds to bank on this demand. These funds then invest in global equities. Edelweiss, for example, targets high-growth Asian equities. PPFAS, meanwhile, targets high-growth US technology stocks.

But most of the money broadly goes into high-growth global themes like AI, semiconductors, and data centres. Thus, while these overseas schemes currently provide big returns, with such schemes looking increasingly attractive, investors have to balance their exposure due to risks like the AI bubble bursting.

“Investors can view GIFT IFSC as one of the ways to gain international exposure. However, they should remember that allocation decisions should be based on long-term strategy, rather than recent performance,” noted Rajani of Anand Rathi.