How to invest abroad through GIFT City: A step-by-step guide

Résumé détaillé

The GIFT City route offers an alternative to investing directly in foreign stocks through overseas brokers

Resident Indians looking to invest abroad can do so through dollar-denominated funds based in GIFT City, the international financial centre in Gujarat. This offers an alternative to investing directly in foreign stocks through overseas brokers, a route examined in an earlier Business Standard article. Here is how to invest through GIFT City, from choosing a fund to transferring money.

The route has drawn interest because many international mutual funds from domestic fund houses have stopped taking fresh money. The mutual fund industry as a whole has reached the $7 billion overseas investment limit set by the regulators, and funds based in GIFT City are not subject to that limit.

One attraction is regulatory oversight. GIFT City funds come under the International Financial Services Centres Authority (IFSCA), an Indian regulator. Investors using overseas brokers may have limited recourse through Indian regulators if something goes wrong, says Deepesh Raghaw, a Securities and Exchange Board of India (Sebi)-registered investment advisor and founder of PersonalFinancePlan.in. Those seeking to avoid cross-border disputes may prefer Indian funds or the GIFT City route, he says.

Another reason is to hold assets in dollars. The rupee has tended to weaken against the dollar over time, so dollar assets can cushion that fall. Hema Thakkar, head of business development (alternatives) at PPFAS, says investors use these funds to build a dollar corpus for goals like a child’s education abroad, where the bills will be in dollars. A Balasubramanian, managing director and chief executive of Aditya Birla Sun Life Asset Management Company (AMC), also cites overseas education and travel.

The market, however, is still developing. GIFT City was established primarily to attract foreign and non-resident Indian (NRI) investment into India, Raghaw says, and outbound retail funds remain a small segment.

Balasubramanian agrees that outward investment is only one part of GIFT City’s business, with…

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