Benchmarks to Compare GIFT City Mutual Funds

"My GIFT City fund gave 12% but Nifty gave 15%. Should I pull out?"

We hear this exact question every week in our WhatsApp community at Belong. The answer is almost always: you're comparing the wrong numbers.

Here's the problem. Your GIFT City fund reports returns in USD. Nifty 50 reports returns in rupees.

When the rupee falls 4% against the dollar, that 15% Nifty return actually becomes about 11% in dollar terms. Suddenly, your 12% USD return has beaten the market.

This is not a minor detail. It's the difference between staying invested in a winning strategy and abandoning it out of false disappointment.

At Belong, we've spent over two years studying GIFT City products, helping thousands of NRIs compare GIFT City mutual funds accurately.

This guide gives you the exact benchmarking framework we use. No guesswork, no misleading comparisons.

Why Standard Indian Benchmarks Break Down for GIFT City

Every domestic Indian mutual fund declares a benchmark in its Scheme Information Document. Large-cap funds use Nifty 50 or Sensex. Mid-cap funds use Nifty Midcap 150.

This system works because everything is in the same currency. The fund, the benchmark, and your returns are all denominated in rupees.

GIFT City changes this equation entirely. The IFSC operates as foreign territory on Indian soil, with investments denominated in USD, GBP, or EUR.

When you compare a USD-denominated fund to an INR-denominated index, you're measuring two different things.

The fund's NAV moves based on underlying asset performance AND currency movements between the dollar and the rupee.

Over the past decade, the rupee has depreciated roughly 3-4% annually against the dollar (Source: RBI Annual Report). This consistent depreciation creates a persistent gap between INR returns and USD returns.

So the first rule of GIFT City benchmarking is simple. Both the fund and the benchmark must be measured in the same currency.

👉 Tip: Before accepting any performance comparison, ask: "Are both numbers in the same currency?" If not, the comparison is meaningless. Use Belong's Rupee vs Dollar Tracker to see how currency movements distort returns over time.

Inbound vs Outbound Funds Need Different Benchmarks

Not all GIFT City mutual funds invest in the same markets.

The benchmark you pick depends entirely on where the fund puts your money.

Inbound funds take your dollars and invest in Indian equities, bonds, or mutual fund schemes.

The Tata India Dynamic Equity Fund is a good example. It invests in Tata AMC's Indian equity mutual funds and ETFs, giving you Indian market exposure in USD.

For inbound funds, the right benchmark is an Indian equity index converted to USD terms.

The Nifty 50 Total Return Index (TRI) adjusted for USD-INR exchange rate movements works best.

Outbound funds invest in international markets. The DSP Global Equity Fund holds stocks like Amazon and Meta, targeting global equity growth.

For outbound funds, the appropriate benchmark is a global equity index already denominated in USD. The MSCI World Index or S\&P 500 Total Return Index fits naturally.

Mixing these up leads to absurd conclusions.

Comparing a global equity fund to Nifty 50 is like comparing a Dubai property's rental yield to Mumbai rental rates. Different markets, different currencies, different dynamics.

👉 Tip: Check the fund's offer document for its stated benchmark. Then verify if that benchmark is denominated in the same currency as the fund. If not, you'll need to convert it yourself. Compare GIFT City fund options on Belong to see which funds match your investment goals.

How to Convert an INR Benchmark to USD (Step by Step)

This is where most NRIs give up. The conversion sounds complex, but the math is straightforward.

Say Nifty 50 returned 15% in rupees over one year. During the same period, the rupee moved from ₹83 to ₹86.50 per dollar. That's roughly 4.2% depreciation.

To convert: USD Return = (1 + INR Return) / (1 + Depreciation Rate) - 1. So: (1.15) / (1.042) - 1 = approximately 10.4%.

Your GIFT City inbound fund returning 12% in USD actually outperformed the Nifty by 1.6 percentage points. Without this conversion, you'd have wrongly concluded it underperformed by 3%.

Here's a quick reference for how currency depreciation impacts benchmark conversion:

The pattern is clear. Every 1% of rupee depreciation eats about 1% from your USD-adjusted benchmark. Over a decade, this compounds significantly.

👉 Tip: Don't do this math manually every quarter. Track the GIFT Nifty on Belong. GIFT Nifty trades on NSE International Exchange in GIFT City and offers a USD-denominated way to track Indian equity market sentiment. Both the GIFT Nifty and your GIFT City fund operate in the IFSC, making it a natural currency-matched reference point.

Total Return Index vs Price Index: A Mistake That Costs You

This is a quieter error, but it can distort comparisons by 1-2% per year.

The Nifty 50 Price Index tracks only stock price movements. The Nifty 50 Total Return Index (TRI) includes dividends reinvested.

For equity benchmarking, SEBI mandated the use of TRI since February 2018 (Source: SEBI Circular, 2018).

Most GIFT City fund returns already include dividends and other income in their NAV. If you compare that against a price-only index, the fund looks better than it actually is.

Always use the Total Return Index version of any benchmark. This applies to Nifty 50 TRI, MSCI World TRI, S\&P 500 TRI, and every other relevant index.

This isn't just academic precision. Over 10 years, the Nifty 50 TRI has outperformed the Nifty 50 Price Index by 12-15% cumulative, thanks to dividend reinvestment.

If you're not using TRI benchmarks, you're flattering your fund's performance without realizing it. Every serious evaluation must account for this.

What About GIFT City Fixed Deposits? They Need Different Benchmarks Entirely

Some NRIs hold a mix of GIFT City mutual funds and GIFT City USD fixed deposits. Benchmarking the FDs against equity indices makes no sense.

The right comparison for USD fixed deposits includes three reference points. First, the US Treasury yield. The 1-year US Treasury yield serves as the risk-free rate in USD terms.

If GIFT City FDs offer 5% while 1-year Treasuries yield around 4%, you're earning a decent premium for minimal extra risk. That's the clean comparison.

Second, UAE bank USD deposit rates. Most UAE banks pay 3-4% on USD savings accounts. GIFT City's 5% represents meaningful outperformance with comparable safety.

Third, FCNR deposit rates at Indian banks. FCNR deposits are also USD-denominated, but they sit in regular Indian banks under RBI regulation. GIFT City FDs operate under IFSCA regulation with distinct tax advantages.

Compare current FD rates across all these options on Belong. The differences may surprise you.

👉 Tip: Never compare an FD return against an equity benchmark. A GIFT City FD earning 5% in USD didn't "underperform" because Nifty gave 15%. They serve completely different roles in your portfolio. If you're deciding between FDs and mutual funds, read our detailed comparison of GIFT City FDs vs mutual funds.

The Currency-Adjusted Worked Example Every NRI Should See

Let's walk through a real scenario. This is the single most useful exercise for understanding GIFT City benchmarking.

Priya (name changed), a project manager in Abu Dhabi, invested $25,000 in a GIFT City inbound equity fund in January 2025. By December, her fund was worth $28,000. That's a 12% return in USD.

During the same period, the Nifty 50 rose 15% in rupees. Her colleague told her the fund underperformed. She nearly redeemed.

But here's the actual math. USD-INR moved from ₹83 to ₹86.50 over that year. The Nifty 50's 15% in INR translates to roughly 10.6% in USD terms.

Priya's fund actually outperformed by 1.4% in the currency that matters to her. She's earning in dirhams (pegged to USD), spending in dirhams, and saving in dollars. The INR number is irrelevant to her financial life.

Now consider the reverse. If the rupee had strengthened (say from ₹83 to ₹80), the Nifty's 15% INR return would translate to about 18.7% in USD. In that scenario, the GIFT City fund truly underperformed.

Currency cuts both ways. The benchmark conversion tells you the truth either way. Without it, you're guessing.

👉 Tip: If your long-term plan involves staying in the UAE or another dollar-linked economy, USD returns are what matter. But if you're planning to return to India within five years, INR returns become more relevant. Match your benchmark currency to your spending currency, not your emotional attachment to rupee numbers.

Benchmarking AIFs in GIFT City: A Separate Challenge

If you've graduated beyond retail mutual funds and invested in GIFT City AIFs, benchmarking gets more complex. AIFs vary wildly in strategy, making one-size-fits-all benchmarks impossible.

Category I AIFs (venture capital, infrastructure): These are long-term, illiquid investments. Compare them against PE/VC industry benchmarks like the Cambridge Associates indices.

Expected IRR targets typically range from 15-20% over the fund's life.

Category II AIFs (private equity, debt): Use private credit indices or real estate return benchmarks depending on the fund's strategy.

These usually target 12-18% returns over their investment horizon.

Category III AIFs (hedge fund strategies): Compare against absolute return benchmarks or the Nifty 50 TRI adjusted for the fund's stated volatility target.

Category III AIFs investing in Indian equity mutual funds are fully exempt from capital gains tax in India for non-residents.

The minimum investment for AIFs dropped to $75,000 in February 2025 (Source: IFSCA Circular, Feb 2025). This makes them accessible to more NRIs, but the benchmarking complexity remains.

For AIFs with lock-in periods (typically 3 years), short-term benchmark comparisons are meaningless. Evaluate them over their full investment cycle. A fund that trails Nifty in year one but delivers 18% annualized over five years is doing its job.

👉 Tip: Ask your AIF manager for their stated benchmark and expected return profile at the time of investment. Hold them to that, not to a random index you saw on a financial news site. Explore GIFT City AIF options on Belong's comparison tool.

When Absolute Returns Beat Relative Benchmarks

Here's a perspective that most benchmarking guides overlook.

Sometimes, beating a benchmark doesn't matter. What matters is whether the fund meets YOUR financial goal.

Say your retirement plan needs 7% annual USD returns to be on track. Your GIFT City fund delivers 8%. During the same year, the USD-adjusted Nifty returned 9%.

Your fund "underperformed" relative to the benchmark by 1%. But it exceeded your required return by 1%. You're ahead of plan.

NRIs with specific USD-denominated goals, like funding a child's US university education or buying property in Dubai, should care more about absolute returns in dollars than relative performance. The benchmark is a useful reference, not a verdict.

Conversely, if your fund returned 5% but you needed 7%, it doesn't matter that the benchmark also dropped. You're still behind on your plan.

This is why we always recommend starting with your financial goals before picking benchmarks. The right question isn't "Did my fund beat Nifty?" It's "Am I on track to reach my target?"

👉 Tip: Write down your required USD return rate before investing. Review it annually. If your GIFT City fund consistently meets your target, don't be swayed by benchmark comparisons that use the wrong currency or index.

Rolling Returns vs Point-to-Point: Which Tells the Real Story?

Point-to-point returns are what most NRIs check. You look at your fund's value on Day 1 and its value today. Simple.

But they're misleading. If you happened to start investing on a market peak, your point-to-point return looks terrible.

If you started on a dip, it looks amazing. Timing distorts the picture.

Rolling returns solve this problem.

A 3-year rolling return calculates the return for every possible 3-year period in the fund's history, like January 2023 to January 2026, February 2023 to February 2026, and so on.

This shows you the fund's consistency.

A fund that beats its benchmark in 85% of rolling 3-year periods is far more reliable than one that beat it once by a huge margin.

For GIFT City funds, this analysis is limited by their short history. Most retail schemes launched in 2025. But as the ecosystem matures, rolling return analysis will become essential for serious evaluation.

For now, evaluate the underlying domestic funds' rolling returns as a proxy. The Tata India Dynamic Equity Fund invests in Tata AMC's existing schemes that have 5-10 year rolling return histories.

👉 Tip: Don't judge a GIFT City fund by one quarter's returns. Look at the underlying fund's long-term consistency instead. Consistency matters more than spectacular short bursts.

Expense Ratios: The Hidden Benchmark Drag

Even if your fund matches its benchmark before costs, it may underperform after them. The expense ratio is a guaranteed drag on returns every single year.

GIFT City mutual funds typically carry expense ratios of 2-3.5%. Regular Indian mutual fund direct plans run 0.5-2.5% (Source: Belong analysis).

That difference sounds alarming. But it ignores the tax savings.

GIFT City funds are exempt from GST on management fees, Securities Transaction Tax, and Commodities Transaction Tax.

For non-residents, there's no TDS on redemption. These savings can be worth 8-10% of returns.

So the effective cost comparison must include taxes. A GIFT City fund with a 2.5% expense ratio but zero tax drag often beats a domestic fund with 1% expense ratio but 20% TDS plus GST plus STT.

When benchmarking, always compare post-expense, post-tax returns. Not headline numbers. This is the only honest comparison.

👉 Tip: Always factor in the expense ratio when comparing a GIFT City fund to its benchmark. A fund that trails its benchmark by 0.5% but has a 2% expense ratio is actually generating 1.5% alpha before costs. That's impressive fund management.

Common Benchmarking Mistakes NRIs Make

After advising thousands of NRIs through Belong, we've seen the same errors repeatedly. Avoiding these will save you from poor decisions.

Mistake 1: Comparing USD returns to INR benchmarks.

This is the most common error. We've covered it in detail above, but it bears repeating. A GIFT City fund returning 10% in USD has likely matched or beaten a Nifty returning 14% in INR, once you adjust for depreciation.

Mistake 2: Using price indices instead of total return indices.

Always use the TRI version of any benchmark. The dividend component adds 1-2% per year.

Mistake 3: Comparing different risk profiles.

A conservative hybrid GIFT City fund shouldn't be judged against the Nifty 50. A debt-oriented fund should be compared to a fixed-income index. Match the benchmark's risk level to the fund's actual strategy.

Mistake 4: Looking at only one quarter.

Markets are volatile. One bad quarter doesn't make a fund bad. Evaluate over at least 3-year periods to smooth out short-term noise.

Mistake 5: Ignoring the feeder fund structure.

Many GIFT City mutual funds are feeder funds. The Tata India Dynamic Equity Fund invests in Tata AMC's existing Indian schemes. So the GIFT City fund's returns will be the underlying fund's returns minus the GIFT City layer's additional expenses plus any currency impact. Compare at the right level.

Mistake 6: Not accounting for the 2030 sunset clause.

GIFT City's tax holiday extends through March 2030 (Source: Union Budget 2025). When comparing pre-tax GIFT City returns against post-tax domestic fund returns, remember this advantage may not last forever.

A Four-Step Framework You Can Use Today

Let's make this practical. Here's the framework our team uses at Belong when helping NRIs evaluate their GIFT City investments.

Step 1: Identify the fund's investment strategy.

Is it an inbound Indian equity fund? An outbound global equity fund? A debt fund? A hybrid? This determines which index family to use.

Step 2: Select the right currency-matched benchmark.

For Indian equity funds, use Nifty 50 TRI or Nifty 500 TRI converted to USD. For global equity funds, use MSCI World or S\&P 500 in USD. For debt funds, use US Treasury yields or Bloomberg Global Bond Index.

Step 3: Compare over 3+ year periods.

Short-term currency volatility can make any fund look brilliant or terrible. Three years smooths this out. For newer funds, evaluate the underlying domestic fund's longer track record.

Step 4: Calculate post-tax, post-expense returns.

Subtract the expense ratio from the fund's gross return. Then compare to the benchmark. For NRIs in zero-tax countries like the UAE, also factor in the tax saved versus what you'd pay on a domestic fund. The effective comparison is post-tax returns in your currency.

This framework prevents the most common benchmarking errors. It works for retail mutual funds, AIFs, and even FDs.

How the DSP Global Equity Fund Declares Its Benchmark

Looking at real fund documents reveals how AMCs handle benchmarking in GIFT City.

The DSP Global Equity Fund was launched in June 2025 as India's first retail-focused offshore mutual fund from GIFT City (Source: DSP Fund Offer Document, November 2025). It invests in global equities like Amazon, Meta, and Lululemon.

The fund's taxes are calculated daily and built into the NAV. So the NAV you see is already post-tax and post-expense. No separate TDS filings, no extra paperwork.

For this fund, the natural benchmark is the MSCI World Index in USD. Both the fund and the benchmark operate in the same currency, same asset class (global equities), and same risk profile.

If the fund returns 14% in USD and MSCI World returned 12%, the fund generated 2% alpha. Clean, simple, no currency conversion needed.

Explore the DSP Global Equity Fund on Belong to track its NAV and compare against benchmarks.

The Tata India Dynamic Equity Fund works differently. It invests in Indian markets through domestic mutual fund schemes. Its NAV is reported in USD, but the underlying assets are in rupees.

This creates a double-layered benchmarking challenge. You need to evaluate both the underlying Indian fund performance (against Nifty in INR) AND the overall GIFT City fund performance (against Nifty in USD).

The fund dynamically allocates 50-100% to broad-based equity funds and 0-50% to sectoral and thematic opportunities (Source: Business Standard, Sep 2025).

This active allocation means a blended benchmark (like 70% Nifty 50 TRI + 30% Nifty Thematic Index, both in USD) would be more appropriate than a single index.

What GIFT Nifty Tells You (and What It Doesn't)

GIFT Nifty (formerly SGX Nifty) trades on NSE International Exchange in GIFT City. It settles in USD and offers nearly 21 hours of daily trading.

For GIFT City inbound equity funds, GIFT Nifty provides a useful real-time reference. Both the fund and GIFT Nifty operate in the IFSC, both settle in foreign currency, and both reflect Indian market exposure.

But GIFT Nifty is a derivatives contract, not an investment fund. Its price reflects futures premium or discount, market expectations, and global sentiment. It doesn't capture dividends.

So use GIFT Nifty as a directional indicator, not as a precise benchmark. For exact performance comparison, the Nifty 50 TRI converted to USD is more accurate.

Track GIFT Nifty movements on Belong to get a quick sense of how Indian markets are performing in USD terms. It's especially useful during global events that move both Indian equities and the rupee simultaneously.

The Return-to-India Angle: How Your Benchmark Should Shift

If you're planning to move back to India within 5-7 years, your benchmarking approach should gradually shift.

While you're an NRI earning and spending in USD, USD-denominated benchmarks make sense. Your GIFT City fund's 12% in USD is the number that matters.

But once you return, your spending currency becomes INR. Suddenly, the rupee-denominated Nifty 50 TRI becomes the more relevant comparison.

During the transition period, track both. Compare your fund against USD-adjusted AND INR benchmarks. This dual view helps you decide when to shift from GIFT City funds to domestic mutual funds.

Also consider the tax impact. GIFT City mutual fund returns are tax-exempt for non-residents. Once you become a resident, your tax status changes. Plan your exit during the NRI or RNOR period to maximize tax-free returns.

The residential status transition is one of the most complex financial events for an NRI. Your benchmark currency should evolve alongside it.

👉 Tip: Use Belong's Residential Status Calculator to check exactly when your status will change. This determines both your tax picture and which benchmark currency to prioritize.

Peer Comparison: Comparing Fund Against Fund

Benchmarking against indices is essential. But comparing a GIFT City fund against other GIFT City funds is equally valuable.

The ecosystem is still small. As of early 2026, only a handful of retail mutual fund schemes operate in GIFT City. But you can still compare funds within the same category.

For inbound Indian equity funds, compare the Tata India Dynamic Equity Fund against the Sundaram India Mid Cap Fund. Different strategies, but both target Indian equity exposure in USD. Which delivered better risk-adjusted returns?

For outbound funds, compare the DSP Global Equity Fund against the Edelweiss Greater China Fund. Different geographies, but both are USD-denominated equity funds.

Peer comparison removes the currency conversion problem entirely. Both funds operate in the same currency, same regulatory framework, and same tax structure.

As more AMCs launch retail schemes in GIFT City (Nippon India and Mirae Asset are planning entries), peer comparisons will become richer and more meaningful. Explore all available funds on Belong to start building your comparison set.

Risk-Adjusted Returns: The Benchmark Most NRIs Skip

Raw returns don't tell the whole story. A fund that returned 15% with wild swings is less reliable than one that returned 12% steadily.

Risk-adjusted metrics like the Sharpe Ratio measure returns per unit of risk taken. A higher Sharpe Ratio means better compensation for the volatility you endured.

For GIFT City funds, calculate the Sharpe Ratio using USD risk-free rates (US Treasury yields). A GIFT City equity fund with a Sharpe Ratio of 0.8 is performing well. Below 0.5 suggests the returns don't justify the risk.

Another useful metric is maximum drawdown. This shows the largest peak-to-trough decline in the fund's history.

A fund that fell 25% during a market correction requires a 33% recovery just to break even.

For newer GIFT City funds without long track records, check the underlying domestic fund's risk metrics. Tata's domestic equity funds have well-documented Sharpe Ratios and drawdown histories across multiple market cycles.

Risk-adjusted benchmarking is what separates casual investors from serious ones. It's the difference between chasing high returns and building sustainable wealth.

Pick the Right Yardstick, Make the Right Decision

Benchmarking sounds technical. But it comes down to three things: same currency, same risk profile, same time period.

Get those right, and you'll stop making decisions based on misleading comparisons. You'll stop abandoning winning strategies. And you'll stop chasing numbers that look good on paper but mean nothing in your currency.

GIFT City mutual funds are still new. The ecosystem has over 200 fund management entities and is growing fast (Source: IFSCA Bulletin Q1 2025). But the benchmarking principles here will apply for decades.

Thousands of NRIs discuss fund performance, share benchmarking methods, and exchange insights in Belong's WhatsApp community. If you're evaluating a specific fund and want a second opinion, that's the place to ask.

Ready to start comparing? Download the Belong app to access GIFT City mutual fund data, FD rate comparisons, and tools built for NRIs who take their money seriously.

Disclaimer: Mutual fund investments are subject to market risks. Read all scheme-related documents carefully before investing. The information provided is for educational purposes and does not constitute investment advice. Past performance does not guarantee future results. Consult a SEBI-registered advisor for personalized recommendations. Tax treatment depends on individual circumstances and may change.