Indian Investors Chase Global AI Boom

Driven by strong performance in global markets, especially in themes like AI and semiconductors, Indian investors are expanding their horizons beyond domestic equities. Over the past year, international markets have shown greater returns, prompting a significant shift in investment strategies.

Resident Indian investors have several avenues to access these global opportunities. The most straightforward path is through international mutual funds offered by Indian asset management companies. However, these funds are approaching the Reserve Bank of India's $7 billion industry-wide limit, leading to restrictions on new lump sum investments and capped SIPs.

Alternative options include funds domiciled in GIFT City, which require a higher minimum investment of around $5,000 and fall under the Liberalised Remittance Scheme (LRS) of $250,000 annually. Direct investing via international brokerage accounts offers the widest selection of global stocks and ETFs but involves additional forex conversion, brokerage charges, and compliance considerations.

Tax implications vary. Investments through the mutual fund route attract capital gains tax. GIFT City funds are taxed at the fund level, with no investor-level taxation. Direct US stock investments may also be subject to US estate tax for non-residents if holdings exceed $60,000.