Why the Singapore route does not apply to you
Residents of Singapore and the UAE can escape Indian tax on gains from Indian mutual funds because those treaties have a residual clause that gives such gains to the country of residence only, and units are not shares, so they fall into that clause. It is a specific feature of those treaties.
Hong Kong's treaty with India is written differently on purpose. Its capital-gains article, Article 14, lets India tax gains on shares of an Indian company. And its residual clause, Article 14(6), says gains on any other property may be taxed in each country under its own law. That is not the same as taxable only in the country of residence. So the escape that works for Singapore is not in the Hong Kong treaty at all.
Both shares and fund units are taxable in India
For a Hong Kong resident, gains on Indian company shares are taxable in India under Article 14(5), with no grandfathering or cut-off date. And gains on Indian mutual fund units, which are not shares and so fall into the residual Article 14(6), are also taxable in India, because that clause preserves India's right to tax under its own law.
So there is no version of the units-are-not-shares argument that gets you out of Indian tax here. Whatever you hold, Indian shares or Indian funds, the gain is India's to tax.
You are taxed once, in India, at the normal rates
The one piece of good news is that there is no double tax. Hong Kong has no capital gains tax of its own, confirmed by the treaty itself, which lists only profits tax, salaries tax and property tax as Hong Kong's covered taxes. So your Indian gain is taxed once, in India, and Hong Kong adds nothing.
The Indian rate depends on what you sell. Long-term gains on listed shares and equity mutual funds are 12.5% above the yearly exemption, without indexation; short-term gains on listed shares are 20%; other long-term gains are 12.5%. The fund house or broker deducts TDS under Section 195 when you sell, and you file an Indian return to settle the exact tax and reclaim any excess.
Where the treaty does help you
The treaty does not help on capital gains, but it does cut the tax on your Indian income. On dividends from Indian companies, the India-Hong Kong treaty caps the rate at 5%, well below the 20% India would otherwise withhold, and on interest it caps the rate at 10%. To get those rates you give the payer or its registrar a tax residency certificate and Form 10F before the relevant date, the same as for any treaty.
So the sensible plan for a Hong Kong resident is to accept that Indian gains are taxed in India and keep that tax correct and minimal, while using the treaty where it genuinely helps, on your dividends and interest.