The Hindu Business Line : Overseas equity funds take out $18 m

THE Indian stock market has come under pressure from investors in overseas mutual funds, which are either dedicated to investing in the Indian stock market or funds that target investments in emerging markets as a whole.

Overseas investors in India-specific funds have exited to the tune of $18 million in the week ended May 12, 2004 according to Emerging Portfolio.com Research (EPRF), a US-based research organisation tracking flow of such funds. India-specific funds manage about $3.2 billion in assets, the research organisation also reported.

The outflows reverse the trends seen earlier. For instance, EPRF had said that the Asian equity funds had healthy inflows of $238 million during the week ended April 23, and India accounted for $105.2 million. It also said then that equity funds dedicated to investing in India had received $1.12 billion of total inflows till the end of that week, which was 53 per cent more than the total assets in such funds at the beginning of the year.

In the week ended May 12, funds dedicated to emerging market investments in general, too, came under investor redemption pressure in the same week with $938 million being redeemed out of a total of about $52 billion in assets managed by them. To the extent any portion of the monies of these funds is invested in the India market the redemption by these investors would impact on the Indian market.

However, it appears that the current phenomenon was not restricted to India or even Asia alone. Equity funds are facing net redemptions right across the globe. Redemptions are plaguing even mature markets such as the US and Europe.

Investors in other equity fund groups such as China, Greater China, Latin America and Russia have also redeemed more money relative to investors in India dedicated funds. Investors in equity fund groups such as Malaysia, Korea, Mexico, Taiwan and Thailand have in contrast redeemed at a lower rate relative to investors in India dedicated funds.

Overall, out of the $3 billion redeemed from equity funds globally, $1.7 billion is from dedicated emerging market funds.

The exodus of funds from equity funds across the globe can be seen in the backdrop of rising uncertainty triggered by the possibility of increase in the US interest rates, rising oil prices, possible slowdown in China's growth rate and political uncertainties.

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Overseas equity funds take out $18 m