GIFT City, positioned as a two-way investment gateway, is encountering initial challenges in its ambition. While some inbound and outbound funds have facilitated cross-border investments, diminishing dollar returns from Indian equities and geopolitical uncertainties are damping investor enthusiasm, causing a slowdown in capital movement through the financial hub.
For global investors aiming to invest in India, GIFT City simplifies the process. New retail offerings, such as the TATA Dynamic Equity Fund, have reduced entry thresholds to $500. Other mutual fund (MF) schemes available in GIFT City include the DSP Global Equity Fund (outbound), the Edelweiss Greater China Equity Fund (outbound), and the Sundaram India Mid Cap Fund (inbound). Additionally, PPFAS Asset Management has introduced two outbound passive funds: the Parag Parikh IFSC S&P 500 Fund and the IFSC Nasdaq 100 Fund of Fund.
However, low returns are making Indian markets less appealing to global investors. In dollar terms, the Nifty and Sensex indices have registered negative returns of 5% and 6% respectively over the past year, with individual stock returns plummeting by 16%.
For Indian residents, GIFT City has emerged as an essential channel for foreign investments, especially following the closure of the popular mutual fund schemes. GIFT City’s outbound funds circumvent this constraint, allowing locals to use the Liberalised Remittance Scheme (LRS) quota of $250,000 to invest in global markets.
Nirmal Bari, Principal Officer and Director of Parag Parikh Financial Advisory Services, noted that the funds were launched at the onset of the West Asia conflict, and although the markets initially corrected significantly, they have rebounded by 20% since then. Hema Thakkar, Head of Business Development at the same firm, highlighted that the Indian markets have remained stagnant for the past eighteen months, while the Nasdaq and S&P indices have seen substantial growth, bolstered by companies with promising long-term prospects.
Akshat Garg, AVP of Research & Product at Choice Wealth, indicated that despite demand, everyday usage remains in nascent stages. The current minimum investment requirement of about $5,000 positions these offerings for serious, educated investors, creating a structured entry point for this cross-border product.
Additionally, the upfront Tax Collected at Source (TCS) on foreign remittances temporarily constrains investor liquidity, coupled with a general lack of public awareness, which restricts market size. Saurabh Jain, Head of Fundamental Research at SMC Global Securities, remarked that mutual fund schemes launched through GIFT City may initially struggle to attract significant global investor inflows, given that overseas investors already have various established channels for investing in India.
Concerns regarding limited track records, liquidity, and low global awareness may hinder short-term progress. Nonetheless, Jain noted that favorable tax advantages and regulatory support might enhance adoption in the future.
Published on June 3, 2026.
