Investors expand overseas portfolio through GIFT City, Pg11

Key Highlights:

• Indian investors are increasingly using Gujarat International Finance Tec-City (GIFT City) to invest in foreign assets like US stocks and Exchange Traded Funds (ETFs).
• The Global Access Provider (GAP) platform of India International Exchange (India INX) saw its traded value surge over 80% quarter-on-quarter to approximately $1.74 billion in the June quarter.
• This growth is attributed to portfolio diversification, higher retail participation, and easier access to global markets.
• The Reserve Bank of India's (RBI) Liberalised Remittance Scheme (LRS) permits resident individuals to remit up to $250,000 overseas annually.

Detailed Insights:

• GIFT City serves as a crucial hub, enabling Indian investors to diversify their portfolios into international markets, including those in FATF-compliant jurisdictions.
• The International Financial Services Centres Authority (IFSCA) provides the regulatory framework for financial services within GIFT City, fostering a secure environment for overseas investments.
• The significant increase in traded value highlights a growing trend among Indian investors towards global diversification.
• Both proprietary traders and retail investors are actively contributing to the rising popularity of this investment avenue.
• Remittances under the Liberalised Remittance Scheme (LRS) for equity and debt have increased more than fourfold from FY19 to FY26, indicating a structural shift in investment patterns.
• The relatively stronger returns from US markets in rupee terms, compared to domestic benchmark indices, have also incentivized this shift.

Key Concepts Involved:

• Gujarat International Finance Tec-City (GIFT City): India's first operational smart city and international financial services centre, designed to be a global financial hub.
• International Financial Services Centres Authority (IFSCA): The unified regulatory body for the development and regulation of financial products, services, and institutions in International Financial Services Centres (IFSCs) in India.
• India International Exchange (India INX): India's first international exchange, located in GIFT City, facilitating trading in various asset classes for global investors.
• Liberalised Remittance Scheme (LRS): An RBI scheme allowing resident individuals to remit up to $250,000 per financial year for permissible current or capital account transactions.
• FATF-compliant jurisdictions: Countries that adhere to the standards set by the Financial Action Task Force (FATF) to combat money laundering and terrorist financing.
• Exchange Traded Funds (ETFs): Investment funds traded on stock exchanges, typically tracking an index and holding a basket of assets like stocks, bonds, or commodities.