"My GIFT City fund returned 12% but Nifty 50 returned 15%. Should I be worried?"
We hear versions of this question weekly in our Belong WhatsApp community. The short answer: you might be comparing apples to oranges without realizing it.
Here's the problem. Your GIFT City fund operates in USD. Nifty 50 operates in rupees. When the rupee depreciates 4% against the dollar, that 15% Nifty return becomes roughly 11% in dollar terms. Suddenly your 12% USD return looks better.
Choosing the right benchmark isn't academic. It determines whether you think your investment succeeded or failed.
Get it wrong, and you might abandon a winning strategy or stick with a losing one.
Why Standard Benchmarks Don't Work Directly
Most Indian mutual funds compare themselves to indices like Nifty 50, Nifty 500, or sector-specific benchmarks. This makes sense when everything operates in rupees.
GIFT City changes this equation. The IFSC functions as foreign territory on Indian soil. Investments happen in USD, GBP, or EUR. Returns come back in those same currencies.
When you compare a USD-denominated fund directly 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 your investing currency and the rupee.
Track the GIFT Nifty to understand how Indian market movements translate to IFSC trading.
👉 Tip: Before accepting any benchmark comparison, check if both the fund and benchmark are measured in the same currency.
Benchmarks for GIFT City Equity Funds
Most GIFT City mutual funds investing in Indian equities use feeder structures. They invest in mainland India schemes, which then buy Indian stocks.
The appropriate benchmark depends on what the underlying fund invests in:
Fund Type | Appropriate Benchmark | Currency Consideration |
|---|---|---|
Large-cap feeder | Nifty 50 Total Return | Convert to USD for true comparison |
Multi-cap feeder | Nifty 500 Total Return | Convert to USD for true comparison |
Flexi-cap feeder | Nifty 500 Total Return | Convert to USD for true comparison |
Global equity | MSCI World Index | Already in USD |
The key adjustment: convert benchmark returns to USD before comparing. A fund showing 12% returns against a benchmark showing 14% might actually be outperforming if currency adjustment is applied.
Explore available options through the GIFT City Mutual Funds tool.
Benchmarks for USD Fixed Deposits
GIFT City USD FDs require completely different benchmarks than equity funds. Comparing them to Nifty 50 makes no sense.
Appropriate benchmarks for USD fixed deposits include:
US Treasury yields: The 1-year US Treasury yield serves as a risk-free rate benchmark. If GIFT City FDs offer 5-6% while 1-year Treasuries yield 4.5%, you're earning a premium for minimal additional risk.
UAE bank USD deposit rates: For UAE-based NRIs, compare with what local banks offer on USD deposits. Most UAE banks pay 3-4% on USD savings. GIFT City's 5-6% represents meaningful outperformance.
FCNR deposit rates: Traditional FCNR deposits at Indian banks offer another comparison point. GIFT City often matches or exceeds these rates while offering tax advantages.
Compare current rates using our NRI FD rates tool.
👉 Tip: For fixed deposits, benchmark against other fixed-income options in the same currency, not against equity indices.
Benchmarks for Alternative Investment Funds
GIFT City AIFs vary dramatically in strategy. A private equity AIF and a hedge fund AIF need different benchmarks entirely.
Category I AIFs (venture capital, infrastructure): Compare against PE/VC industry benchmarks like Cambridge Associates indices. Expect 15-20% IRR targets over fund life.
Category II AIFs (private equity, debt): Use private credit indices or real estate return benchmarks depending on strategy. These typically target 12-18% returns.
Category III AIFs (hedge fund strategies): Compare against absolute return benchmarks or Nifty 50 Total Return Index adjusted for the fund's stated volatility target.
The minimum investment for AIFs dropped to $75,000 in February 2025 (Source: IFSCA circular). Explore options through the AIF explorer tool.
The Currency Adjustment Challenge
This is where most NRIs get confused. A practical example:
You invest $25,000 in a GIFT City equity fund. After one year, it's worth $28,000. That's a 12% return. During the same period, Nifty 50 rose 15% in rupees.
Did your fund underperform? Not necessarily.
If USD-INR moved from ₹83 to ₹86.50 (roughly 4% rupee depreciation), the Nifty 50 return in USD terms is approximately 11%. Your fund actually outperformed.
Over the past decade, the rupee has depreciated roughly 3-4% annually against the dollar (Source: RBI). This consistent depreciation makes USD returns more valuable than they appear against INR benchmarks.
GIFT Nifty: A Unique Benchmark Option
GIFT Nifty (formerly SGX Nifty) trades on NSE International Exchange in GIFT City. It offers a USD-denominated way to track Indian equity market sentiment with nearly 21 hours of daily trading.
For GIFT City equity funds tracking Indian markets, GIFT Nifty provides a currency-matched benchmark. Both operate in IFSC, both settle in foreign currency, and both reflect Indian market exposure.
Monitor movements using our GIFT Nifty tracker.
What Fund Houses Actually Use
Looking at actual GIFT City fund documents reveals how AMCs handle benchmarking:
Tata India Dynamic Equity Fund: Uses Nifty 50 Total Return Index as benchmark but reports NAV in USD. This requires investors to do currency adjustment themselves.
DSP funds in GIFT City: Similar approach with Indian equity benchmarks reported in INR while fund operates in USD.
The industry hasn't standardized USD-adjusted benchmark reporting. This creates comparison challenges for investors. Until standardization happens, you must do currency math yourself.
Mistakes to Avoid When Benchmarking
Comparing short periods: Currency movements can dominate short-term comparisons. Use 3-year rolling comparisons minimum.
Ignoring total return indices: Price indices ignore dividends. Always use total return benchmarks like Nifty 50 TRI.
Using inappropriate risk benchmarks: A conservative hybrid fund shouldn't be compared against pure equity Nifty 50. Match benchmark risk profile to fund strategy.
Forgetting expense ratios: GIFT City funds often have higher expenses than direct plans. Account for this cost difference in comparisons.
A Practical Framework
Here's how we recommend approaching GIFT City benchmark comparison:
Step 1: Identify your fund's investment strategy (Indian equity, global equity, debt, hybrid).
Step 2: Select the appropriate index benchmark for that strategy.
Step 3: Convert benchmark returns to your fund's currency using average exchange rates.
Step 4: Compare over 3+ year periods to smooth currency volatility.
For mutual fund comparisons, this framework prevents the most common benchmarking errors.
When Benchmarks Matter Less
Sometimes absolute returns matter more than relative performance. If your retirement planning requires 7% annual USD returns and your GIFT City portfolio delivers 8%, does it matter if a benchmark returned 9%? You've met your goal.
For NRIs with specific USD-denominated liabilities (children's US education, planned property purchase), absolute returns in the right currency often matter more than beating arbitrary benchmarks.
Your Benchmark Checklist
Before evaluating any GIFT City investment, confirm:
Is the benchmark measured in the same currency as my investment? Have I used total return indices that include dividends? Am I comparing similar risk profiles? Have I looked at 3+ year periods, not just recent quarters?
Many NRIs in our WhatsApp community discuss benchmark selection and performance tracking. Join to learn from others navigating similar decisions.
Download the Belong app to track GIFT City investments, compare fund performance, and access tools that make proper benchmarking easier.
