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- What is GIFT City Investment in Mutual Funds?
GIFT City (Gujarat International Finance Tec-City) is India’s first International Financial Services Centre (IFSC), allowing global and Indian investors to invest in foreign markets through dedicated mutual fund schemes. Mutual funds operating in GIFT City are regulated by the International Financial Services Centres Authority (IFSCA).
These mutual funds enable Indian and global investors to access international investment opportunities in a tax-efficient manner. They can invest in offshore equities, bonds, ETFs, and other asset classes that are not typically available through domestic mutual funds.
- Tax Implications of GIFT City Mutual Funds
Tax benefits depend on the investor’s residency and whether the fund is structured as a feeder fund, international fund, or alternative investment fund (AIF).
For Indian Residents:
Investments in GIFT City funds are treated as overseas investments, meaning they are subject to capital gains tax as per Indian tax laws.
Long-Term Capital Gains (LTCG): Taxed at 20% with indexation benefits (if held for more than 3 years).
Short-Term Capital Gains (STCG): Taxed at the individual’s applicable income tax slab rate (if held for less than 3 years).
No Securities Transaction Tax (STT) applies.
For Non-Resident Indians (NRIs) & Foreign Investors:
NRIs can invest without the restrictions of the Indian equity mutual fund market.
Tax benefits are available under DTAA (Double Taxation Avoidance Agreements) with certain countries.
Some structures offer tax neutrality, making them attractive for global investors.
- Who is Investing in These Funds?
HNIs (High-Net-Worth Individuals) looking for global diversification.
Institutional investors, including pension funds and insurance companies.
NRIs & OCIs (Overseas Citizens of India) looking for tax-efficient ways to invest in global markets.
Domestic retail investors interested in foreign stocks and ETFs (depending on eligibility).
- Who is Introducing These Funds?
Several leading Indian and international asset management companies (AMCs) have launched mutual funds under GIFT City’s IFSC framework. Some notable ones include:
SBI Mutual Fund (SBI International Access – US Equity Fund)
HDFC Mutual Fund
Kotak Mutual Fund
ICICI Prudential Mutual Fund
Nippon India Mutual Fund
Franklin Templeton
Aditya Birla Sun Life Mutual Fund
These funds provide Indian investors with access to global equities, bonds, and alternative investments through a regulated offshore structure.
Gujarat International Finance Tec-City (GIFT City) is India’s premier International Financial Services Centre (IFSC), designed to attract global investments by offering world-class infrastructure and a regulatory framework tailored for international financial transactions.
Within GIFT City, various funds have been established, each with unique investment strategies, performance records, and holdings. Below is an overview of some notable funds:
- Motilal Oswal GIFT City Fund
Investment Strategy: This fund employs a multi-cap, long-only approach, focusing on high-growth Indian equities. It emphasizes themes such as “China+1,” “Make in India,” and urbanization, aligning with India’s economic trajectory.
Sectoral Allocation:
Manufacturing and Capital Expenditure: 31.9%
Consumer Discretionary: 26.2%
Power and Energy: 16%
Performance : Since its inception in March 2023, the fund has delivered a 56.2% return, significantly outperforming benchmarks like the BSE 500 Index and MSCI India.
Notable Holdings: The portfolio includes companies such as APAR Industries, Zomato, Suzlon Energy, and Trent Limited, representing diverse growth opportunities.
- SBI Funds International (IFSC) Limited Overview : A wholly-owned subsidiary of SBI Funds Management Ltd., this entity operates within GIFT City, offering investment solutions across client segments. Fund Offering: The SBI Investment Opportunities Fund (IFSC) is an open-ended restricted scheme classified as a Category III Alternative Investment Fund under IFSCA regulations.
- Nippon India Large Cap Fund GIFT Overview : Managed by Nippon Life India Asset Management Limited (IFSC Branch), this feeder fund invests in the established Nippon India Large Cap Fund, which manages over ₹35,000 crore in assets. General Insights on GIFT City Funds
GIFT City funds are mutual funds launched by Asset Management Companies (AMCs) operating within the GIFT City IFSC. They adhere to regulations set by the International Financial Services Centre Authority (IFSCA) and invest in global markets, providing exposure to international securities such as equities and bonds. These funds are denominated in multiple currencies, facilitating investments from Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs).
Key Features:
Diversification : Access to global securities across various currencies, offering portfolio diversification.
Regulatory Compliance: Governed by IFSCA, ensuring robust investor protection.
Professional Management: Managed by experienced fund managers with expertise in global markets.
Currency Options: Investments can be made in multiple currencies, simplifying the process for international investors.
Considerations for Investors:
Minimum Investment: Typically, a high minimum investment threshold (e.g., USD 150,000), making them more suitable for investors with substantial assets.
Liquidity : Potentially lower liquidity compared to domestic mutual funds, which may affect the ease of exiting investments.
Market and Currency Risks: Exposure to global markets introduces risks related to market volatility and currency fluctuations.
Investors interested in GIFT City funds should conduct thorough due diligence, considering factors such as investment strategy alignment, risk tolerance, and the specific terms of each fund. Consulting with financial advisors familiar with GIFT City regulations and offerings is advisable to make informed investment decisions.
