Focusing a portfolio entirely in India is a singular bet on one economy. While historically rewarding, experts warn this creates a concentration risk. However, GIFT City in Gandhinagar allows Indian investors to diversify internationally without leaving the domestic financial framework.
“India is a fantastic structural growth story yet a 100 per cent home-biased portfolio is a concentrated risk,” said Aditya Agarwal, cofounder of Wealthy.in, a wealth management platform for mutual fund distributors. Allocating capital overseas, particularly in markets like the United States (US), can act as a “shock absorber” against domestic volatility.
Overseas exposure gives Indian investors access to “global megatrends such as advanced AI, cutting-edge healthcare, clean energy and cybersecurity,” Agarwal said.
Currency diversification is another factor. With the rupee historically depreciating by 3-4 per cent annually against the US dollar, holding dollar-denominated assets can help hedge long-term currency risk.
How much should you allocate?
Agarwal suggested a 5-25 per cent allocation, depending on risk appetite:
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5-10 per cent for conservative investors -
10-15 per cent for moderate investors -
15–25 per cent for aggressive investors
Shweta Rajani, head of mutual funds at Anand Rathi Wealth Limited, made a more conservative recommendation. “Global investing through GIFT City should be seen as a small diversification opportunity rather than the core of one’s portfolio,” she said.
Rajani recommended:
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5-10 per cent allocation for portfolios above Rs 5 crore -
2–5 per cent for Rs 1–5 crore portfolios
For instance, in a Rs 10 crore portfolio, Rs 50 lakh to Rs 1 crore can be allocated to global assets, while the rest remains in domestic equities.
Ajay Lakhotia, chief executive officer and founder of StockGro, said any investment must be disciplined. “SIPs help average market volatility and are particularly effective for building long-term global exposure,” he said, referring to systematic investment plans of mutual funds.
Taxation
GIFT City does not offer a tax-free route for resident investors.
“There is no difference in taxation… investors are not investing through GIFT City because of a tax advantage,” Agarwal said.
For resident individuals:
Long-term capital gains (after 24 months): 12.5 per cent
Short-term gains: Taxed as per income slab
Rajani said that gains above Rs 1.25 lakh are taxable. That means a Rs 10 lakh long-term gain would result in tax on Rs 8.75 lakh after exemption.
Lakhotia emphasised that Indian residents are taxed on global income, and these investments must also be disclosed in income tax returns.
Cost and execution: GIFT vs LRS
Investing abroad has traditionally been done through the Liberalised Remittance Scheme (LRS), but this route has cost and compliance friction.
Rajani explained that remittances above Rs 10 lakh attract 20 per cent Tax Collected at Source (TCS). “If an investor sends Rs 50 lakh abroad, Rs 8 lakh gets blocked upfront until adjusted during tax filing,” she said.
GIFT City structures can reduce this friction. Lakhotia estimates that:
Direct LRS investing costs around 1.8–2.5 per cent in the first year
GIFT City routes cost about 1.1–1.6 per cent, making them 30–40 per cent cheaper over time
However, Agarwal clarifies that GIFT City investments still fall under LRS limits of $250,000 per year. The key difference is that industry-level caps on overseas mutual funds no longer apply, allowing larger allocations over time.
Risks and limitations
GIFT City is not a short cut to make money.
“There is still a lot of friction in sending money under LRS,” said Agarwal, citing KYC requirements and banking processes.
“Global tech is highly volatile; it has to be paced out,” he added, warning against chasing short-term returns.
“Global markets are influenced by foreign economic cycles, geopolitical events and currency movements that many Indian investors may find difficult to track,” said Rajani.
Currency risk can also cut both ways. Even if an asset rises in dollar terms, rupee appreciation can reduce returns.
Lakhotia noted structural limitations such as lock-ins, liquidity constraints, and evolving regulations. “GIFT City may not be ideal for small investors… or anyone uncomfortable with currency risk,” he said.
GIFT City is emerging as a viable gateway for global investing, offering cost efficiencies and better access. But it is not a shortcut to higher returns or lower taxes.
For most investors, it works best as a measured allocation within a long-term portfolio, rather than a tactical bet. As Agarwal put it, global investing should be driven by “an asset allocation framework” rather than recent performance.
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