Indian investors seeking diversification are exploring the emerging GIFT City platform and the established Liberalised Remittance Scheme, with experts highlighting progress and pitfalls in each route.
Indian investors looking for ways to diversify overseas still have two main routes, according to Ashutosh Gupta and Dhirendra Kumar in a Value Research discussion: the emerging GIFT City platform and the Liberalised Remittance Scheme, or LRS. Gupta said GIFT City is still developing, with products and operational processes continuing to fall into place, but he described it as a promising channel for mutual fund investors. Kumar, meanwhile, argued that direct international fund options once available to retail investors have largely closed to new money, leaving only a narrow set of alternatives.
GIFT City, formally India’s first International Financial Services Centre in Gandhinagar, operates under the International Financial Services Centres Authority and is designed to let financial activity take place in foreign currencies such as dollars, euros and pounds. Its promoters highlight tax advantages, including a 10-year income tax holiday and exemptions from several transaction levies, as part of the pitch to make it a global financial hub. But Gupta said the route is still in its early phase, with the practicalities of moving money in, investing and redeeming still being standardised.
The other route is LRS, which allows Indian residents to remit up to $250,000 a financial year for permitted current or capital account transactions, including overseas investments. Gupta said investors can use it to open a broking account abroad and buy exchange traded funds, or ETFs, and individual shares directly. Kumar cautioned that direct stock investing comes with complications many investors overlook, including estate tax exposure and a need to understand the tax structure before putting money overseas. He said the ease offered by apps should not be mistaken for simplicity in legal or tax terms.
Kumar also warned against chasing international ETFs that already have investor demand but cannot accept fresh inflows, because those funds can start trading at a premium to their underlying net asset value. In his view, that makes them closer to a speculative trade than a clean route to diversification. Both speakers agreed that overseas exposure is worth having, but they said mutual funds remain the most practical option for most investors because they offer simplicity, liquidity and a familiar regulatory framework. Gupta added that there are around 15 fund houses preparing GIFT City offerings, suggesting the market may become more usable over the next six to 12 months as the banking and operational side matures.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
