Investors pulled out over USD 41 billion from equity funds focused on emerging markets, including India, in the first three months of 2014, after the US Federal Reserve began winding down its quantitative-easing programme, says a report by funds tracking firm EPFR Global.
However, investors have started moving back to emerging market equities during the final days of March, it said.
According to the report, USD 41.05 billion has flown out of emerging market equities funds in January-March period of 2014, against an inflow of USD 29.78 billion in the same period last year.
"Emerging market equity funds endured a rough start to 2014 as the winding down of the Federal Reserve's quantitative easing programme, a crowded electoral calendar, mixed economic data from China and events in Ukraine gave both institutional and retail investors plenty of good reasons to keep a distance," the report added.
It, however, said the final days of March saw equity funds focused on emerging markets make a "modest but perceptible start on reversing the more than USD 40 billion worth of outflows - a quarterly record - that they chalked up during the first three months of 2014."
EPFR said rebound was mainly due to institutional investors as they were the main drivers of overall flows into equity funds.
At the country-wise level, equity funds focused on China witnessed a withdrawal of USD 3.01 billion in January-March period of 2014, followed by Korea (USD 1.56 billion), Mexico (USD 1.10 billion), India (USD 870 million), Brazil (USD 602 million) and Russia (USD 345 million).
The report said "flows into India equity funds began to rebound as investors responded to better inflation and current account deficit numbers and hopes of a more business friendly government in the aftermath of May's general elections."