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For the past few years, one message has been constant across investor conversations in India: “You should add some global exposure. A little bit of the US market can balance your portfolio.”
Some investors tried doing that through domestic mutual funds that offered some international allocation. But those funds were always limited. The industry had a cap on how much could be invested overseas, and once that limit was reached, many schemes had to pause fresh inflows.
So even if you believed in the idea of global diversification, your actual options stayed restricted.
GIFT City is now changing that.
It is creating a parallel route for Indian investors to own global equities through dedicated GIFT City–based feeder funds that invest fully in international markets without being constrained by domestic limits. This means global exposure is no longer a small slice inside an Indian fund; it can now be a complete, index-linked allocation.
PPFAS, known for its long-term global investing lens, is entering this space with two new funds from the GIFT City IFSC: one tracking the S&P 500 and another the Nasdaq 100. You invest from India, the fund routes through GIFT City in USD, and you get clean, direct exposure to two of the world’s most followed indices.
In this blog, we explain what GIFT City is, how these PPFAS funds work, their tax and regulatory structure, and which type of investor they are best suited for.
How These PPFAS GIFT City Funds Actually Work
1. These Funds Simply Feed Into the Index
Both PPFAS GIFT City schemes – the S&P 500 FoF and the Nasdaq 100 FoF work in a straightforward way.
They do not choose individual US stocks. They take the money collected from investors and put it into an international ETF or UCITS fund that already tracks the respective index.
So the process is simple: you invest → the fund sends the money to the overseas ETF → you get index exposure.
2. The Fund Operates in USD, While You Invest in INR
Everything inside the fund is handled in US dollars – the transactions, the NAV, the underlying portfolio.
But you still invest from your regular Indian bank account. Your INR is converted into USD within GIFT City under the LRS framework, and the fund manages the rest.
There’s no need to open any foreign account or maintain overseas documents.
3. Open-Ended, Daily Liquidity, and No Exit Load
Operationally, these funds behave like regular mutual funds. You can invest or redeem on any business day. There is no lock-in, no exit load, and NAVs are published daily.
The only difference is the minimum investment requirement: USD 5,000 initially, and USD 500 for top-ups.
PPFAS has positioned this to ensure the global allocation is meaningful from day one.
4. Two NAVs: One for Long-Term Holders, One for Short-Term
This is unique to IFSC funds. The scheme publishes:
- A long-term NAV for investors who hold for more than two years
- A short-term NAV for those who redeem earlier
Why? Because all capital gains tax is paid inside the fund based on your holding period. You never file capital gains separately for this investment, as the NAV you receive is already adjusted for the tax impact.
5. Pure Index Exposure, Nothing Else
The underlying ETFs follow the S&P 500 or Nasdaq 100 exactly as the index dictates: market-cap weighting, periodic rebalancing, and index rule changes.
Since the PPFAS fund is simply a feeder, it does not try to outperform the index. Its objective is to have the same behaviour as the index.
6. Built for Efficiency Under the GIFT City Framework
The IFSC structure provides advantages that domestic funds cannot:
- No US inheritance tax exposure
- Taxation handled at the fund level
- USD denomination for natural global alignment
- Lower friction in FX and transactions
- Dedicated compliance and operations under IFSCA
PPFAS has created a fully staffed GIFT City entity to run these funds, signalling long-term commitment rather than a one-off product launch.
In simple words: You invest in India → the money moves to GIFT City → it gets invested in the S&P 500 or Nasdaq 100 ETF → and you get clean, full global exposure in a mutual-fund-like format.
What Exactly Do You Get When You Invest?
When you invest in these PPFAS GIFT City funds, you are not betting on a single company or a sector. You are buying into two of the most important stock market indices in the world, i.e. the S&P 500 or the Nasdaq 100. Both represent the largest, strongest, most influential companies in the United States. But they are built differently and behave differently.
Here is a simple breakdown.
1. The S&P 500: The Broad Market of America
It tracks 500 of the largest listed US companies, covering everything from technology to healthcare to financial services to consumer staples.
What makes it special:
- It represents ~80% of the entire US stock market
- It includes all 11 major sectors (tech, healthcare, finance, consumer, energy, utilities, etc.)
- It has 65+ years of history and is one of the world’s most trusted benchmarks
- Companies must be profitable to enter (a built-in quality filter)
The deck shows that the S&P 500 has companies like Apple, Microsoft, Amazon, Berkshire Hathaway, JPMorgan, Visa and more – a naturally diversified mix spread across industries.
This index is stable, balanced and reflects the long-term growth of the US economy.
2. The Nasdaq 100: The Technology Growth Engine
It tracks the 100 largest non-financial companies listed on the Nasdaq exchange, dominated by technology, digital platforms and high-growth businesses.
What makes it special:
- Tech-heavy: ~64% of the index comes from technology
- Represents the world’s leading innovators
- No requirement to be profitable – so faster growth, higher volatility
- Houses giants like Nvidia, Microsoft, Apple, Amazon, Tesla, Alphabet, Meta, Netflix
The deck highlights that the top 25 companies form around 82% of the index, showing how dominant these tech leaders are in the modern economy.
The Nasdaq 100 tends to move faster both upwards and downwards and captures long-term innovation cycles.
3. How the Two Indices Differ
A lot of investors ask, “Which one should I invest in?” The answer depends on what kind of global exposure you want.
Here is the easiest way to think about it:
S&P 500 = Stability + Breadth
You get exposure to almost every large US sector, including defensive industries like healthcare, financials, consumer staples and energy. Historically, this index has shown smoother, more moderate long-term returns.
Nasdaq 100 = Innovation + Growth
This is where the world’s most advanced technology companies live. It moves faster than the S&P 500 and can outperform in long-term growth cycles (AI, cloud, digital platforms), but also correct sharply when valuations cool.
Both have been among the top-performing global indices over multiple decades and the deck shows how both have ranked extremely well in returning USD growth over different time periods.
How Tax Works in These PPFAS GIFT City Funds
One of the biggest differences between a GIFT City fund and a domestic mutual fund is the way tax is handled. And for most Indian investors, this is where the structure becomes genuinely attractive.
Here is the simplest way to think about it.
1. You do NOT pay capital gains tax when you redeem
In a normal Indian mutual fund, you file and pay capital gains tax yourself. In a foreign brokerage account, you handle capital gains, dividends by filling the returns.
But in a GIFT City fund, all tax is paid inside the fund, not by you.
When the fund buys, sells, earns dividends, or realizes gains, the applicable tax is handled at the fund level. You receive the post-tax NAV.
The final redemption amount you receive is already net of all tax implications.
2. No US capital gains tax. No US dividend withholding.
Directly owning US securities can expose Indian investors to:
- US withholding tax on dividends
- US capital gains tax complications
- US estate tax (inheritance tax) above certain thresholds
- W-8BEN forms and other compliance filings
In this structure, you face none of it because you are not the direct owner of the US ETF. The fund is the owner, so the fund handles whatever is applicable.
4. Your job at tax time is extremely simple
When you file your Indian tax return:
- Your redemption proceeds are exempt in your hands
- There is no capital gains entry
- There is no dividend entry
- There is no foreign income entry
The only thing you may need (depending on your situation) is to declare the investment in the foreign asset schedule, because the fund is located in the IFSC zone.
This is a disclosure, not a tax payment.
Who Should Consider These Funds (And Who Should Not)
GIFT City funds open an entirely new path for global investing. But like every product, they are not meant for everyone. The right investors will find them extremely useful, and the wrong investors might feel out of place.
Here is a clear, practical way to think about it.
Who Should Consider These Funds
1. Investors Who Truly Want Global Exposure
If you’ve always believed that your portfolio should include global companies such as Apple, Amazon, Nvidia – the timeless US consumer brands then this is a direct and clean way to do it.
2. Investors Building a Serious Long-Term Portfolio
These are not products for quick trades. They suit investors who are building wealth for:
- Retirement
- Long-term goals
- Children’s education abroad
- Dollar-linked future expenses
A 7–10 year view works best here. Both indices have shown strong long-term performance in USD terms.
3. Investors Who Value Simplicity Over Managing Tax
Some investors want global exposure but do not want to:
- Handle capital gains calculations
- Track USD dividends
- File foreign tax forms
- Manage the compliance burden of overseas accounts
Because tax is paid inside the fund, life becomes dramatically simple.
4. Investors Who Can Allocate at Least USD 5,000 Meaningfully
This is not a ₹500 SIP product. The $5,000 entry point ensures the exposure is meaningful but still retail-friendly.
It suits investors whose overall portfolio is large enough to absorb a global slice without becoming too concentrated.
Who Should Avoid These Funds
1. Very Conservative Investors
If volatility makes you uncomfortable, especially USD volatility, then this is not the right product. Both indices can see corrections. The Nasdaq 100 can move sharply during global tech cycles.
2. Investors With a Short Time Horizon
Because the fund publishes different NAVs for short-term vs long-term holding periods, a horizon of less than 2 years does not make sense. Short-term investors may not fully benefit from the structure.
3. Investors Whose Entire Portfolio Is Still Small
If your total portfolio is, say, ₹5–10 lakh, putting ₹4+ lakh ($5,000) into a global fund might distort your allocation. You may want to build a stronger domestic foundation first.
4. Investors Expecting “Outperformance” or Alpha
These are passive funds. They will not beat the S&P 500 or Nasdaq 100. They simply deliver the index, minus a small expense.
If someone wants:
- tactical bets
- concentrated thematic exposure
- timing-based opportunities
This is not the product.
Conclusion
GIFT City provides a separate regulatory route for offering USD-denominated, globally invested funds outside the domestic overseas limits. The PPFAS S&P 500 and Nasdaq 100 FoFs are early examples of this framework in action. They follow a feeder structure, invest into overseas index ETFs, publish USD-based NAVs and handle taxation at the fund level.
The two indices represent different parts of the US market, and the funds follow the standard IFSC features such as daily liquidity, no exit load and long-term/short-term NAV treatment.
These products illustrate how the GIFT City ecosystem is being used to deliver global index exposure in a pooled, regulated format for Indian investors.
