September has been a good month of fund inflows for India. Net FII flows into India topped $1.25 billion for September, making it one of the best months in recent times.
Mr Brad Durham, Managing Director of Emerging Portfolio Fund Research, discusses how strong flows will be going forward. Excerpts from CNBC-TV18's exclusive interview with Mr Brad Durham:
Net money worth $1.25 billion has come into India. From the universe that you track, which are the ones that have been actually bringing this money in?It is interesting that in the last several weeks, more specifically in Q3, the India country funds we track, about 35 funds of about $15 billion in total assets have actually taken in about $600 million net inflows.
Now that doesn't sound like a big number, but it's relative to the outflows from the emerging market equity funds in general, and from other fund groups such as BRIC funds, which have seen three consecutive weeks of net outflows.
It's really the dedicated India funds that are seeing strong amounts of interest right now.
Which ones in specific stand out for India?
The bigger ones like HSBC India Fund have done pretty well. It's clear that investors are looking for more targeted exposure to specific emerging markets through dedicated country funds like India funds.
The so-called GEM Equity Funds have a little less appeal. I think this is probably just due to the current environment. Also, declining oil prices are helpful for India's current account situation and inflation.
For the India specific funds, which ones sold out the most in this past quarter?
I think it's the ones that have seen the biggest interest; HSBC India fund, Schroeder India fund, which is quite large, JP Morgan, and Fleming Asset Management, which runs quite a large India fund. Most of the funds, which have an excess of $1 billion in total assets, have been the ones that have been most attractive.
In this past week, what has been your experience or what have you seen in terms of India funds and BRIC funds by ways of inflows?Last week was very interesting; the emerging market equity funds as a whole had outflows. We track about 15 of the BRIC Equity Funds, with about $10 billion in total assets. India funds had inflows of $100 million.
So along with the Greater China Funds and the China Funds, India and China, within the emerging market equity fund universe that we track, are really and certainly very attractive to institutional and retail investors.
But I think there is also another story to be told. While investors are looking for very direct exposure to India, India is not really capitalising on another potential. There is an even bigger pool of assets, and that is in some of these large global equity funds.
These funds have actually been reducing their India weightages in recent months and even recent years.
So the GEM Equity Fund weightage in India is down to about 4.9 per cent, that's down from about 7 per cent in 2004. This is its lowest since 2002.