India-focused active fund flow positive for first time since Feb ’12

Aug 13 2014, 12:55 IST
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SummaryIndia-focused active funds have seen net inflows for the first time in the past 28 months.

India-focused active funds have seen net inflows for the first time in the past 28 months. After witnessing outflows worth $4.9 billion since February 2012, these funds attracted capital worth $88 million in July, according to a report by Kotak Institutional Equities.

Total listed fund flows into India amounted to $0.95 billion during the period. ETF participation was India-focused ($0.13 billion) as well as EM-focused ($0.38 billion). With total net FII inflows into India ($2.5 billion) superseding listed fund activity substantially, other market participants were active in July as well.

Allocations to India by Asia ex-Japan funds touched 12.7% in June 2014, which was 0.3% higher than May (12.4%), according to the report. China, India and Taiwan were the preferred investment destinations in the Asia ex-Japan region in June. GEM funds have seen allocations to India stabilise at 10.6%. Taiwan and Russia saw an increase in allocations over the past three months. Korea saw reduction in allocations by Asia ex-Japan funds and GEM funds.

Smart beta is being preferred over plain-vanilla products in the India ETF landscape with WisdomTree India Earnings Fund (EPI) attracting $0.6 billion over the past three months, said the report. While most prevalent index methodologies base their index construction on free-float and investability, EPI allocates higher weights to more profitable companies, thereby offering cheaper benchmark valuations.

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