How to Invest in US Markets from India: GIFT City and LRS Explained
Introduction
Interest in US markets has grown rapidly among Indian investors, especially as global tech giants and leading indices like the S&P 500 and Nasdaq continue to deliver long-term growth. However, many investors are confused because RBI and SEBI have restricted domestic mutual funds from investing more overseas due to the industry-wide USD 7-billion cap.
The good news: Indian investors can still legally and efficiently invest in US markets through alternative routes. This article explains how GIFT City funds and the Liberalised Remittance Scheme (LRS) provide full access to US equities, ETFs and global portfolios.
Why Domestic Mutual Funds Are Restricted
Indian mutual funds operate under a combined industry limit of USD 7 billion for overseas equity investments.
This cap was reached in 2022, forcing SEBI to restrict:
- New inflows into international equity schemes
- Launches of new US-focused funds
- Additional offshore allocations in existing schemes
The restriction aims to manage foreign exchange outflows, not to limit investors.
Crucially, these rules apply only to domestic mutual funds, not to individual investors.
How You Can Still Invest in US Markets
Despite the mutual fund restriction, Indian investors have two fully open routes to invest in US stocks, ETFs, and funds: GIFT City and LRS.
1. Investing in US Markets via GIFT City (IFSC Route)
GIFT City (International Financial Services Centre – IFSC) operates under International Financial Services Centres Authority – IFSCA, which is separate from SEBI.
As a result:
- GIFT City global funds are not counted under the USD 7-billion overseas MF limit
- They have greater operational flexibility
- Investors can invest in US-focused funds using INR, without sending money abroad
- Funds can freely invest in US equities, ETFs, and global indices
GIFT City is emerging as a preferred offshore-style platform for Indian investors seeking US exposure with simplified compliance and potential tax advantages.
2. Investing in US Markets via LRS (Direct Global Investing)
Under RBI’s Liberalised Remittance Scheme (LRS), every Indian resident can remit USD 250,000 per financial year for foreign investments.
You can invest directly into:
- US stocks (Apple, Microsoft, Nvidia, Amazon etc.)
- US ETFs (S&P 500, Nasdaq 100, Total Market ETFs)
- US mutual funds
- International brokerage accounts
Since LRS is your personal remittance, it is independent of mutual fund restrictions.
This is the simplest and most flexible way to build a custom US portfolio.
Summary Comparison
| Route | US Market Access | Allowed? | Regulator | Part of $7B MF Cap? |
|---|---|---|---|---|
| Domestic MF US schemes | Limited / Closed | Restricted | SEBI/RBI | Yes |
| GIFT City US-focused funds | Fully Allowed | Allowed | IFSCA | No |
| LRS (Direct Investing) | Fully Allowed | Allowed | RBI | No |
Key Takeaways
- Domestic mutual funds are restricted due to the USD 7-billion industry cap, not because US markets are off-limits.
- GIFT City global funds offer direct US market exposure without LRS or forex remittance.
- LRS allows Indians to invest up to USD 250,000 per year directly in US stocks and ETFs.
- Investors have full access to US markets despite MF restrictions.
To explore US market investing through GIFT City funds or structured LRS-based portfolios, connect with CapitaGrow.
Author
Rajesh Narayanan
Mutual Fund Distributor, CapitaGrow
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