AI selloff rattles US markets: What it means for GIFT City investors holding Nasdaq and S&P 500 mutual funds

The sharp selloff in US technology stocks has put international equity investments back in focus for Indian investors accessing overseas markets through GIFT City.

On Friday, October 30, the Nasdaq Composite fell 2.86 percent to close at 25,437, marking its steepest single-day percentage decline since June 5. The S&P 500 dropped 1.82 percent to 7,580.07, while the Dow Jones Industrial Average declined 1.09 percent to 51,770.31. The Nasdaq Composite ended the session 7.8 percent below its record closing high of October 6.

The selloff followed disappointing corporate results and growing concerns over whether technology giants’ massive investments in artificial intelligence (AI) will generate adequate returns.

Amazon, Alphabet, Microsoft and Meta are together expected to spend more than $700 billion on capital expenditure in 2026, with a substantial portion going towards AI infrastructure, data centres and computing capacity. Investors are increasingly seeking evidence that these investments will translate into sustainable revenue and profits.

For Indian investors holding international mutual funds through GIFT City, the correction raises questions about their exposure to US technology stocks and the sustainability of returns.

GIFT City: Nasdaq 100 and S&P 500 funds have delivered double-digit returns

“A total of 14 retail mutual fund schemes have been authorised in GIFT City. Of these, nine are currently live, two to three are in the process of launching their new fund offers (NFOs), while the remaining schemes are expected to launch later this year,” said Ankur Choudhary, CEO and Co-Founder of Belong, a GIFT City-based investment app.

As of October end, the latest performance of GIFT City mutual fund schemes shows that the Parag Parikh IFSC NASDAQ 100 Fund of Fund (FoF) has delivered an 18.22 percent return since inception.

The fund has gained 5.61 percent over three months and 8.88 percent over six months, although its one-month return is negative at 1.52 percent.

The Parag Parikh IFSC S&P 500 FoF has delivered a 14.75 percent return since inception. Its three-month and six-month returns stand at 3.52 percent and 7.58 percent, respectively, while its one-month return is positive at 0.66 percent.

However, the two funds track different indices. The Nasdaq Composite, which fell 2.86 percent on October 30, covers thousands of companies listed on the Nasdaq exchange. The Nasdaq 100, tracked by the Parag Parikh fund, comprises 100 of the largest non-financial companies listed on the exchange.

The S&P 500, meanwhile, tracks 500 leading US companies across sectors. Although it offers broader market exposure, its performance can also be influenced by large technology companies.

A prolonged correction in technology stocks could therefore affect both indices, although the extent of the impact may differ.

Also read: Investing in US stocks? 7 risks Indian investors should understand before putting money in

Other GIFT City funds have also reported losses

The funds’ performance shows that weakness is not limited to US-focused investments.

The DSP Global Equity Fund recorded the steepest one-week decline among the nine schemes, falling 1.99 percent. It is down 4.04 percent over six months and 9.2 percent since inception.

The Edelweiss Greater China Equity Fund declined 7.35 percent over one month and 8.78 percent over six months, while the HDFC International Emerging Markets Equity Fund lost 5.42 percent over one month and 5.88 percent since inception.

India-focused inbound funds have also faced pressure. The Sundaram India Mid Cap Fund has declined 8.35 percent over three months, while the Tata India Dynamic Equity Fund is down 14.07 percent since inception.

These performances underline that international and domestic equity exposure through GIFT City does not shield investors from market volatility. Returns vary depending on the geography, underlying holdings and investment strategy of each fund.

What should investors consider?

For investors holding Nasdaq 100 and S&P 500 funds, the correction is a reason to review portfolio exposure rather than react solely to short-term market movements.

Investors should examine their concentration in technology stocks, particularly if they hold multiple international funds with overlapping portfolios. They should also assess whether their investment horizon is long enough to withstand equity market volatility.

Currency movements matter too. Indian investors should account for USD-INR fluctuations when evaluating their actual returns in rupees, along with applicable costs and taxes.

Most importantly, investors should avoid choosing funds solely on the basis of historical returns. The Nasdaq 100 FoF’s 18.22 percent return since inception is backwards-looking and does not guarantee similar performance in the future.

“GIFT City provides access to international investment opportunities, but it does not eliminate underlying market risks. Geographical diversification, portfolio suitability and investment discipline remain more important than chasing recent winners,” said Choudhary.

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