India's market regulator said on Tuesday that foreign funds set up at GIFT City in Gujarat state can take full investment from non-resident Indians and other Indian-origin citizens.

However, they will need to make granular disclosures about their investors if the fund holds more than 33% of its equity assets under management in a single Indian group.

The funds will have to either submit their investors' identity documents such as passport or permanent account number (PAN) to the Securities and Exchange Board of India (SEBI) or adhere to the regulatory framework set by the International Financial Services Regulatory Authority, which regulates financial services in GIFT City.

The regulator also said that asset management companies should put in place a mechanism to prevent front-running and market abuse.

The mechanism should include enhanced surveillance, internal controls and escalation processes to identify, monitor and address specific types of misconduct, including front-running, insider trading and misuse of sensitive information, SEBI said.

(Reporting by Chris Thomas and Jayshree P Upadhyay; Editing by Sohini Goswami)