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India-dedicated funds saw inflows of $3.1 billion in December, taking the total category inflows in CY23 to $16.2 billion, the latest EPFR data compiled by Kotak Institutional Equities showed. The assets of these funds, which had seen outflows of $2.2 billion in CY22, rose 67.5 per cent during the year to $67 billion.
December’s flows for the category include $2 billion of ETF inflows and $1.1 billion of non-ETF inflows. Most India-dedicated offshore funds are actively managed and have expense ratios substantially higher than those of ETFs. The continuing popularity of these funds, despite higher expenses, indicates that many foreign investors prefer active management over passive when it comes to investing in India, said experts.
Other non-dedicated funds, including global emerging market funds, pulled out $1.03 billion in December, dragging down the total EPFR India flows to $2.07 billion. The other funds saw total outflows of nearly $2.6 billion during CY23. The assets of GEM funds, however, grew by 24 per cent to reach $155 billion.
Among peers, South Korea, Indonesia, and Taiwan saw outflows of $3 billion, $262 million, and $76 million, respectively, in December. China and Brazil saw $10.8 billion and $186 million of inflows, respectively. The total FPI and EPFR activity showed divergent trends for Indonesia, South Korea, and Taiwan.
The EPFR fund flow data primarily tracks mutual funds, ETFs, closed-end funds, variable annuity funds, and insurance-linked funds. It does not include investments from hedge funds, proprietary desks, and sovereign wealth funds, which are tracked by NSDL.
Meanwhile, flows from foreign portfolio investors (FPIs) have turned negative in January after two months of inflows, NSDL data shows. FPIs have pulled out nearly $3 billion from Indian equities this month, following inflows of $7.9 billion in December. FPIs net bought $20.7 billion worth of equities in CY23.
Rising bond yields in the US and the likelihood that the Federal Reserve will not rush to cut interest rates this year has impacted sentiment and triggered the recent bout of selling in the cash market.
BofA Global Research’s latest Asia Fund Manager Survey showed that the respondents were bullish on Indian equities, with a net 18 per cent overweight.
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