Offshore India funds see $1.4 billion net outflow in June quarter; ETFs $383.7 million inflow: Report

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Updated: August 19, 2019 10:05:48 PM

The net outflow dented the asset base of India-focussed offshore funds and ETFs. Their assets declined to USD 52.9 billion during the quarter ended June 2019 from USD 53.5 billion recorded in the previous quarter.

Flows into India-focussed offshore funds are generally considered to be long-term in nature, whereas flows into India-focussed offshore ETFs indicate predominantly short-term money.

India-focussed offshore funds registered a net outflow of USD 1.3 billion in June quarter, while India-focussed offshore ETFs saw a net inflow of USD 383.7 million, says a Morningstar report. The combined net outflow of both the investment vehicles narrowed to USD 941 million in June quarter this year as against USD 1.4 billion in the previous quarter, the report said. The combined net outflow of both investment vehicles reached USD 5.6 billion over the last one-year period ended June 2019, the report added.

Offshore India funds — not domiciled in India — receive flow from overseas investors and invest the money in Indian markets. Offshore funds, as well as ETFs, are prominent investment vehicles through which foreign investors invest in Indian equity markets. India-focussed offshore ETFs witnessed a reversal in trend after seven consecutive months of net outflow, the report said.

The net outflow dented the asset base of India-focussed offshore funds and ETFs. Their assets declined to USD 52.9 billion during the quarter ended June 2019 from USD 53.5 billion recorded in the previous quarter. “The election results, which were in line with street expectations, provided clarity over the continuation of government’s policies and economic reform measures. As expected, the markets reacted positively.

“The positive trend was short-lived. With elections past and euphoria around them subsiding, the focus soon shifted towards fundamental drivers such as the government’s policies on economic reforms, its impact on economic growth,and corporate earnings, in addition to global factors,” said Himanshu Srivastava, senior analyst (Manager Research), Morningstar India. He further noted that despite starting the quarter on a positive note and election results along expected lines, the markets lost steam towards the end of the quarter on the back of growing concerns over domestic macro conditions and a pressing global environment. Flows into India-focussed offshore funds are generally considered to be long-term in nature, whereas flows into India-focussed offshore ETFs indicate predominantly short-term money.

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