During a Youtube “Ask Me Anything” session in October, Zerodha’s* founder and CEO Nithin Kamath announced that the discount broker would start facilitating direct investments in US stocks via Gujarat’s Gift City by early 2026. And with this, it became the latest to join the Gift City bandwagon.

Apart from brokers, mutual funds too are jumping in thick and fast. DSP Mutual Fund made its Gift City debut with the actively managed offshore retail fund DSP Global Equity Fund in June, while Parag Parikh Mutual Fund is set to launch three new overseas Fund of Funds based out of the financial and technology hub. Even Tata Asset Management has launched a Dynamic Equity Fund and Mirae Asset Mutual Fund is planning to launch multiple retail mutual fund schemes based out of Gift City.

Why the rush?

Investment, like nature, abhors a vacuum. And the easier, more straightforward way to invest abroad—via domestic mutual funds that invest in international stocks—has been shut since 2022, when the Reserve Bank of India’s mutual funds’ overseas investment limit of $7 billion was breached. Domestic funds offering international schemes stopped accepting fresh lump sums and even overseas exchange-traded funds, with a separate $1 billion limit, closed the door.

The Ken had written about this back in 2022:

There’s so much demand that mutual funds nearly breached the limit in January (2022) end, utilising nearly 95%, according to industry grapevine. Fund houses are now eagerly waiting for RBI to bump up the limit. “It [the bump-up] just seems to have been caught up in bureaucracy. There is no reason why the limit should not be increased,” says a senior executive in a fund house who does not want to be named.

But three years later, the limit is still the same, in spite of India having huge forex reserves to the tune of around $700 billion. Fund houses’ patience has run out. “There’s no point waiting. We need to move on,” said a senior mutual fund executive who did not want to be named.

No wonder they’re flocking to Gift City. It’s just the market—supply meeting demand. And there’s big demand for foreign stocks, what with the dream AI-fuelled rally on the US bourses. Just that it’s a rich-only invite, a premium club.

While domestic mutual funds investing abroad have to answer to market regulator Sebi, the Gujarat International Finance-Tec-City is a different animal. One of its key features is the International Financial Services Centre (IFSCA), under which financial transactions are—for all regulatory and tax purposes—treated as if they’re being carried out in foreign territory. So, all mutual funds offering schemes out of Gift City are covered under IFSCA, exempting them from RBI’s $7 billion overseas investment limit.

But there’s a catch: funds based in Gift City tend to cater to the moneyed folk, those who can pony up a minimum $5,000 investment (Rs 4.5 lakh).